Homeowners and Flood Insurance

Protecting your investment in your home is an ongoing process. Whether you are adding a new roof, painting or buying appropriate insurance; there will be a significant cost to protecting your home. With flooding, hurricanes, and high wind in the Houston area; insurance becomes even more important.

Buying a home

When you are buying a home in Texas you will normally pay for an option period during which you can back out of the contract without providing a reason for a period of what is normally 7 to 10 days. Besides inspections, you will want to obtain quotes for your homeowners and flood insurance policy. Your insurance agent has information about prior claims on the house which might alert you to an issue. In addition, your agent can confirm whether flood insurance is required (whether the home is in a flood plain) and the cost. If it is required, it is an indication that over a long period, you may have to deal with water in your home or on your property. In addition, over the coming years, the federal government will be raising rates on required flood insurance significantly in trying to match their costs with your premiums. If you are not in a flood plain, flood insurance is not expensive and premiums are not projected to substantially rise in the near term.

Renewing Homeowners Insurance

Your homeowners insurance covers your home, out buildings, and personal property. It will also provide rental and other reimbursement if you have to live at another location while your home is being repaired or replaced. And, it provides a basic level of liability insurance in case you are sued by someone who injures themselves in your home.

Amount of Coverage – Since your coverage does not cover your land, the amount will be less than the total amount for which you home would appraise. Your agent can provide building costs per square foot based on your homes features (brick or wood, custom or not, number of bathrooms, number of stories, etc.) Because your repairs or rebuilding may cost more than the standard figures (for instance, after a hurricane when builders and materials are in short supply), you may want to consider adding replacement cost coverage.

Protecting Your Home

Protecting Your Home

Other Coverages – You will want to know what the policy covers and what it does not cover.  Besides not covering for flooding, there are other matters which may not be covered, but could be added to the policy. For instance, water damage caused by leaking appliances or backups, or mold.

Scheduled Items – Different insurance companies will have different requirements for scheduled items. For instance, jewelry above a certain amount, or certain collections believed to be worth more than a certain amount; may have to be scheduled and have an additional premium. This should be discussed with your agent.

Deductible – The more risk you are willing to assume, the cheaper the policy will be. You take on more risk by increasing the deductible. And, different categories of deductible can apply to different coverages. For instance, wind and hail damage may have a different deductible than other coverages. If you have damage to your home that costs $15,000 to repair (and you are paying for a replacement cost rider), and you have a $5,000 deductible. The insurance company will pay only $10,000 of the cost.

Credits and Discounts – Some insurance companies will reduce your premium if you use the same insurance company for your home and auto (and possibly other insurance.) In addition, many companies provide discounts if your home is monitored by a security company.

Shopping Around – Periodically, you will want to compare rates at different insurance companies. Some agents are independent agents representing more than one company. In theory, these agents can do some of the comparing for you. However, many of those agents do not represent a broad enough range of companies. The State of Texas offers information about insurance and an online tool to compare policy coverages at http://www.opic.state.tx.us/residential-property/compare-policy-coverages/homeowners. And, insure.com at http://www.insure.com/home-insurance/  offers information on insurance and provides links to obtain quotes.

And, one last thing, it would be beneficial if you could document your home and its contents with photos, video and receipts for the day you do have a claim. To do this right requires you to spend some time being somewhat uncomfortable reading unfamiliar information and a having a good insurance agent. It is not the way I want to spend several hours every year. However, when the next insurance bill arrives or the next hurricane hits, you will be glad you did. Good luck.


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