A Look at the Different Homeowner’s Policies in the Lone Star State
What are the best home insurance companies in Texas offering their clients today? We will cover all the basic home insurance policy forms you should know before buying one.
Home Insurance policies in Texas are sold in various types of policies known as “forms”. Arming yourself with this information will allow you to know what types of questions to ask of your agent or broker and give you the tools to make an informed decision.
Price is certainly a big consideration when purchasing home insurance, but equally important is coverage quality and policy limits. I like to think of the insurance policy purchase as a balancing act between price and coverage.
A good insurance broker will have an intimate knowledge of the various risks inherent in your area and know which insurance companies to place you with based on your properties’ risk profile.
HO-1 Basic Form
The HO-1 policy form is the least amount of coverage a person can obtain regarding homeowners insurance and covers you against 10 named perils. These Perils are:
- Smoke and or Fire
- Hail and Windstorms
- Damage from Vehicles
- Damage from Aircraft
- Volcanic Eruptions
- Riots and Civil Unrest
HO-1 Policy is seldom written in the Texas market; however some companies still offer this form of coverage. Be aware these policies typically do NOT cover your personal belongings and contents within your home, nor do they cover liability.
If someone gets hurt on your property or you have a total loss to your home and lose all or a large part of your personal property like clothes, furniture, computers, jewelry, firearms, and the like, your policy may leave you completely exposed to this loss. Additionally, mortgage companies will often decline a mortgage based on this policy form, so it would be best to look into more comprehensive coverage for these other important items.
HO – 2 Broad Form
The HO-2 homeowners policy more broadly covers the structure of the home and may also cover personal belongings as well as liability you would incur for personal injury or property damage. However, this policy form is still a “named perils” policy which means any perils not listed in the policy would be excluded from coverage.
For this reason, most homeowners consider better coverage to meet their needs in the event of a catastrophe. The HO-2 policy covers 6 additional perils in addition to the named perils covered under the HO-1 policy form. These additional perils are:
- Falling Objects
- Weight of Ice, Sleet, or Snow
- Freezing household systems
- Tearing, cracking, burning, or bulging of pipes and other household systems
HO-3 Special Form
The HO-3 home owner’s insurance policy form is one of the best home insurance plans on the market today and offers affordable premiums with a comprehensive coverage package not often found under HO- 1 or HO-2 policy forms. Unlike the two aforementioned forms, the HO-3 is considered an open perils policy. This is advantageous because this would mean the policy would cover ANY perils not specifically listed under the exclusions section of the policy.
For instance, if you had your foundation cracked and needed repair this policy would cover it assuming it is not listed in the exclusions section of the policy. Moreover, the special form also builds in personal property, other structures like a detached garage, and personal liability insurance all in one policy.
Most of these policies are more affordable than you might think, so for this reason most Texas residents opt for the HO-3 or HO-5 policy forms instead of the less comprehensive counterparts. It is important to speak with your broker or insurance agent about how your personal property is covered under this policy.
The best home insurance carriers will cover personal property on a replacement cost basis. The less valuable alternative would be coverage for personal property on a cash value basis. This cash value formula factors in depreciation which could leave you heavily exposed to financial loss should you have a major claim, so be sure to talk with your insurance professional about this aspect of the coverage to ensure you are properly covered for replacement cost.
For Texas residents living near or on the coast, there is also a modified HO-3 policy called: HOB. This policy will typically offer you more coverage for water related claims and will normally have extended coverage for boats and boat trailers while stored on your property.
HO-4 Tenant’s Form
This policy is known as renter’s insurance because it typically will cover the contents of a structure being rented out by a tenant. The Landlord of the property would then purchase a dwelling fire policy to cover the structure and leave you to purchase content and liability coverage while renting the property.
This policy will also extend additional living expense coverage similar to a home owners policy, in the event you should need to live elsewhere while your apartment is being repaired due to damage from something like fire or a hurricane. It is important to ask your broker about how cyour contents would be covered.
It is very important to note if you have replacement cost or actual cash value coverage on your contents. It might be worth spending some extra dollars to cover your belongings at the value of what it would cost to actually replace all your belongings as opposed to coverage based on your replacement cost minus depreciation.
This could make a world of difference to your financial situation should you incur a substantial loss, so be sure to take a close look at this provision under the policy.
HO-5 Comprehensive Form
The HO-5 policy is the best, most broad home insurance money can buy. Like the HO-3 form, the 5 is an open perils policy and will typically cover even more than an HO-3 unless specifically excluded under the terms of the contract. Below you will find several typical exclusions from these two policy forms:
- Earth Movement
- Water Damage
- Insect or animal infestation
- Neglect, wear and tear
- Foundation damage or settling
- Mold, Fungus, and rot
- Intentional Loss
- Ordinance of Law
- Civil War, Government War, or Nuclear Hazard
- Smog, Rust, and Corrosion
Please note you may still have or can add coverage for foundation and water damage by endorsement, so check with your broker about what is and is not covered in this regard. As you may have already figured out by reading this, even the best, most comprehensive home owners insurance policies DO NOT cover flooding from rising waters.
So, in order to cover damage to the structure and your property from the peril of flooding, you must take out a separate flood insurance policy in order to be fully protected. In another post, we will dissect axactly what flood does and does not cover.
HO- 6 Condominium Form Coverage
Condominium policies will typically cover personal property and liability claims as would a standard home owners policy. However, the structure would be limited to the ceiling, inside walls, and the floor of the unit itself. The rest of the condominium structure and grounds would typically be purchased through the home owners association.
HO-7 Mobile Home Form
Just like the HO-6 Condo form, the Mobile Home form is very similar to a standard homeowners policy but designed to fit with a mobile home structure more appropriately. Mobile home policies will cover structure, loss of use, personal liability, and personal property similar to an HO 3 form, just made specifically for mobile or manufactured homes.
HO-8 Older Home Form
The HO 8 policy form can be specifically tailored to meet the unique needs of homeowners with home that are 30 years of age and older. This policy form is best suited for these older homes and offers similar coverage to a standard HO 3 special form.
We’re the Right Homeowner’s Insurance Agent for You
I really hope you learned a lot from this post today and invite you to give us a call at your convenience to review your options and get pricing on your specific piece of property. Our team of professionals will use the latest technology to accurately assess your properties’ value in order to ensure you are getting the right amount of coverage.
We are an independent agency and serve many states across the country for various coverage types like Medicare and under age 65 medical insurance. However, we choose to strictly focus our efforts for home insurance to the Texas marketplace. This gives us the opportunity to truly hone our expertise and increase our knowledge of the Texas home insurance market in order to serve you better.
Call us today! One of our licensed professionals will gladly take the time to thoroughly explain coverage details giving you piece of mind.