Texas easily records the largest number of home insurance claims in the States. So much so that in 2017, the insurance industry made a contribution of $38.5 billion to the state GSP accounting for 2.31% of the same. However, it’s usually not all sunshine when it comes to insurance claims.
“Oh, I’m sorry, did my back hurt your knife?” is probably what you’d say to your insurance company if and when they refuse to help you repair your heavenly abode.
It’s a sad reality that just because you pay insurance premiums does not mean that your insurer is liable to pay for fixes any time you need it. That’s right; your insurer can deny your claims based on the initial terms that you signed up for.
So, knowing what to expect when filing the insurance claim and when NOT to file one can go a long way in preventing expensive premiums and non-renewals.
What are the Types of Homeowner Insurance Coverage?
Apart from coverage for your home, several insurers in Texas combine additional benefits into a single insurance package. There are 5 major types of insurance covers you can opt for, which include the following –
This is the most common type of home insurance policy that covers the replacement cost of damages to your home in the event of a disaster.
This insurance covers the cost of belongings lost or damaged in the event of a disaster. This can help you replace furniture, clothing, electronics, appliances, etc.
In case of severe disasters resulting in vacating your existing plot for repairs, this insurance covers to rent and other living expenses while your property is being repaired.
This insurance covers the cost of outhouses, storage sheds, and standalone garages, i.e., buildings that are not directly connected to the main dwelling.
This insurance covers the medical costs of insured individuals, including family, visitors, and resident employees (maids, etc.).
What Does a Homeowner Policy Cover (And What Does it Not)?
The Texas Department of Insurance (TDI) states that home insurance policies should cover damages from the following –
- Vandalism and civil commotions
- Vehicle and aircraft
Apart from this, counties and zip codes apart from the Texas Gulf Coast are also covered against damages from hurricanes and hail. In these areas, you may claim supplemental coverage from the Texas Windstorm Insurance Association.
Homeowner insurance policies typically do not cover the following:
- Normal wear and tear
- Destructive insects like termites, rats, and insects
- Flood (the National Flood Insurance Program usually provides supplemental coverage against the same).
What are the Factors Determining the Rate of Homeowner’s Insurance Policy?
Insurance companies take several factors into account to determine the rate of insurance policy applicable to a home. These include but may not be limited to the following –
The region where the concerned property is situated is one of the most important factors that insurers consider while determining the housing insurance rate. This is primarily because some areas may be more susceptible to certain dangers than others. For example, Texas is prone to high wind, hail damage, and hurricane, leading to water damage.
On the other hand, if your house is situated near a relief region like a fire station, you may receive a lower interest rate.
- Age and construction of the house
Usually, it isn’t easy to insure older houses as compared to newer ones. In older houses, plumbing and electricity are downright questionable, and you may have to provide proof of proper up-keeping to receive reasonable rates. Any home in poor shape can cost extra to insure, irrespective of its age.
Similarly, houses that feature protective technologies are easier to insure. For example, if your home is designed to prevent fire damage, your dwelling insurance cover against fires will come with a lower rate.
- Financial status and insurance history
Home insurance claims stay on your Comprehensive Loss Underwriting Exchange (CLUE) report for up to 7 years. This report contains insurance history, and companies use this report to judge a homeowner’s propensity to claim damage covers.
If you end up claiming one too many times, insurers might consider this a risk and refrain from extending a new policy when the current one expires. Don’t be surprised if your claim is rejected, even if the cause is accidental.
As with most things, your financial status also plays a role in your insurance rate. While an insurer cannot reject your claim based on your credit score alone, they might include a separate credit-scoring system to determine your eligibility.
The Process of Homeowner Insurance Claim
Here is a summary of how to claim homeowners insurance in case of accidental damage:
Step 1: File a detailed estimate of damages and repair costs. Include every major and minor detail, including the date of loss, damage actuals with photo and video proof.
Step 2: Set up preventive measures to avoid further damage. Some insurance policies mandate this, so it is always better to be on the safer side.
Step 3: Contact the insurance agency and meet their adjuster after collecting his/her details. When the officials visit your property, make sure that he/she inspects every issue marked on your estimate. Ask the adjuster for his/her opinion and the estimated payout.
Step 4: Contact independent adjusters to verify the payout. Once you are satisfied with the proceedings, receive the reimbursement and continue with the repairs.
Common Reasons Why Insurers Can Deny Insurance Claim
Unsurprisingly, the insurance claim process includes proof of authenticity. As stated above, an adjuster will visit the concerned property and verify the damage list you need to prepare. That being said, an insurer can deny your claim if any of the following is found to be true.
- Accident causes not covered in the policy
Your insurance claim will be rejected if your insurance policy does not cover the cause of the damage. The most prominent example of this is flood damage, which is covered additionally by NFIP. So, if your basement is damaged due to a flood and you do not have the supplementary cover, you will not receive any financial aid.
An excellent way to avoid this is by reading the fine print thoroughly. Some insurers provide coverage endorsements over and above the base policy.
- Intentional or unavoidable damage
Obviously, insurance does not cover malicious intent and neglect. Apart from calculating your deductible, this is a crucial step to consider as an adjuster will thoroughly verify the damage list and check for neglect or intentional damage.
- Canceled policy or if you waited too long
Insurance policies have a statutory period and expiry date. Check with the insurer within how many days of damage you need to submit the claim as this can vary from company to company and state to state.
Finally, check the bill for when your policy expires. If your policy is canceled on the 5th and you submit your claim on the 10th, it will obviously not be processed. Wondering how to avoid this? Always pay the insurance bill on time. This will help you avoid days without coverage.
Now here’s a pro tip to conclude this post.
While you may be tempted to claim aid for even minor damages, it might not always be wise to do so. On the fine print, you will find information about the insurance deductible, which is the amount you pay out of your pocket and will be subtracted from the reimbursement amount.
Only claim insurance if the damage payout is significantly higher than the deductible. For example, if your damage estimate is $5000 while the deductible is $1000, file an insurance claim. However, if the deductible for the same estimate is near or above $2500, claiming insurance aid is basically impractical, as you will be paying more out of your pocket to file the claim than the actual cost.
Also, be aware of contractors offering insurance claims wavering deductibles. Under the new Insurance Code regime, such fraudulent claims will be rejected if sufficient proof is not provided alongside the claim.