Shopping Smart Tips for Texans Purchasing Auto, Homeowners & Renters Insurance
Quick Tips to Help You Shop | Auto Insurance | Homeowners Insurance | Renters Insurance | Having Trouble Finding Insurance? | Your Rights against Unfair Discrimination | For More Information or Assistance
(August 2011)
Shopping for insurance is similar to shopping for any major item. It’s best to compare companies and products to find the best price, quality, and customer service.
This publication provides tips that can help you get a better deal on auto, homeowners, and renters insurance.
Know Your Rights
All auto and homeowners policies in Texas must include a Consumer Bill of Rights. The bill of rights explains your legal rights and responsibilities. Read it carefully. You may also view the bills of rights for both types of policies on the Texas Department of Insurance (TDI) website
www.tdi.texas.gov
Quick Tips to Help You Shop
- Determine what coverages you want and need. For instance, if you have valuable car stereo equipment or if you need more than basic coverage for jewelry, collectibles, or other valuables, you might need endorsements that change or add coverage. Endorsements that add coverage will increase your premium.
- Consider factors other than price, including a company’s financial rating and complaint index. The financial rating indicates a company’s financial strength and stability, and the complaint index is an indication of its customer service record.
- Buy only from licensed insurance agents and companies. Most licensed companies must belong to a guaranty association that pays claims for members that become insolvent. You can learn a company’s financial rating, complaint index, and license status by calling the TDI Consumer Help Line or by visiting our website
1-800-252-3439
463-6515 in Austin
www.tdi.texas.gov - Include independent agents in your search. Some agents only represent a single company or company group. Independent agents typically represent several companies and can give you multiple quotes at one time.
- If you buy insurance over the Internet, take the same precautions as you would for any insurance purchase. Many legitimate companies have websites that allow you to purchase insurance online that make shopping for insurance easy and convenient, but also provides the anonymity that allows illegitimate companies to flourish. Be especially cautious of insurance that’s offered through unsolicited e-mails.
- Answer questions truthfully when you apply for insurance or ask for a rate quote. Wrong information may result in an incorrect price quote, rejection of your insurance application, or cancellation of your policy.
- Consider higher deductibles. Your policy will probably have deductibles. A deductible is the amount you have to pay out of pocket on your claim before the insurance company will reimburse you for your loss. The higher your deductibles, the lower your premium. Choose the highest deductibles you can afford.
- Ask about discounts. Insurance companies may offer policy discounts that will lower your premium. Ask your agent what discounts the company offers.
- Make sure you have uninterrupted coverage. Never cancel an existing policy until you get your new policy or a written binder. A binder proves you have coverage until the company issues your policy.
- Don’t pay cash to an individual agent. Pay with a personal check or money order made out to the insurance company or agency. Get a receipt for your premium payment.
- If a company turns you down, keep shopping. Different companies have different criteria for accepting customers.
Auto Insurance
Automobile insurance pays for damages, injuries, and other losses specifically covered by your policy. Many insurance companies use the Texas Personal Automobile Policy, a standardized policy form that offers the following eight types of coverages:
- Liability insurance pays the expenses of people in the other car involved in an accident caused by drivers on your policy, up to your policy’s dollar limits. Expenses can include medical bills, car repair, and car rental. It covers accidents that are caused by you or anyone covered by your policy, including a driver operating your car with your permission. Texas law requires minimum coverage of $30,000 for each injured person, up to a total of $60,000 per accident, and $25,000 for property damage per accident.
- Collision coverage pays for damage to your car regardless of who caused the accident. The company will pay up to the actual cash value of your vehicle, minus your deductible.
- Comprehensive coverage (physical damage other than collision) pays for damage to or loss of your car from causes other than collisions, such as hail, vandalism, flood, fire, and theft.
- Medical payments pays reasonable and necessary medical and funeral expenses if you, a family member, or a passenger in your car is injured or killed in a car accident.
- Personal injury protection (PIP) pays the same as medical payments coverage, plus 80 percent of lost income and the cost of hiring a caregiver for an injured person.
- Uninsured/underinsured motorist (UM/UIM) coverage pays for your injuries and property damage caused by a hit-and-run driver or a motorist without liability insurance. UM/UIM also pays when your medical and car repair bills are higher than the other driver’s liability coverage.
- Towing and labor coverage reimburses you for towing charges when your car must be towed to a repair shop or other destination.
- Rental reimbursement coverage pays a set daily amount for a rental car if your car is being repaired because of damage covered by your auto policy.
Make Sure Your Coverage Fits Your Needs
Don’t buy more coverage than you need. Compare the cost of your annual premium against your car’s Blue Book value, minus your deductible. If you’re paying more in premiums than it would cost to replace your car, consider dropping collision and comprehensive coverage. If you still owe money on your car, your lender will require you to maintain collision and comprehensive coverages.
You may be able to drop some coverages and lower your premium. You may not need PIP and medical payments coverage if you have health and disability insurance. Remember that PIP and medical payments also cover other people if they are injured while in your car. If you belong to an auto club, you may already have towing and labor coverage and don’t need it in your policy.
Factors that Affect Your Premium
Companies may use a number of criteria to establish your premium, including:
- Your age and, for younger drivers, your marital status. Male drivers under 25 and unmarried women under 21 have the highest rates. Drivers over 50 may get discounts.
- Your driving record and claims history. A good driving record can save you money. If you have accidents or tickets on your driving record, you’ll have to pay more for insurance. Companies may add surcharges to your premium for major convictions, some driving violations, and accidents that result in property damage. Some surcharges are mandatory and will apply to your premium for three years.
- Where you keep your car. Because drivers in urban areas have more accidents and auto thefts, their rates are typically higher than the rates for drivers in rural areas.
- Your car’s type. Collision and comprehensive rates are highest for luxury, high-performance, and sports cars. Rates may also be higher for cars that damage easily or cost more to repair.
- Your car’s primary use. Rates for cars driven solely for pleasure are lower than rates for cars driven to and from work or used for business.
- Your credit score. Companies may consider your credit score when deciding whether to sell you a policy and at what cost. A company cannot refuse to sell you a policy or cancel or nonrenew your policy solely based on your credit. Visit the Learning Center on HelpInsure.com, a website maintained by TDI and the Office of Public Insurance Counsel, to find out which companies use credit scores and how they use them.
- Whether you drove uninsured in Texas. Companies may charge more if you drove uninsured in Texas for more than 30 days in the 12 months before you applied for insurance. If you didn’t, a company cannot otherwise charge you more for liability coverage because of your prior lack of coverage.
Ask about Discounts
Ask your agent whether you qualify for any discounts the company offers. The discounts offered and the amount will vary by company. Following are some of the things you might be able to get discounts for:
- defensive driving courses
- driver education courses for young drivers
- students with good grades
- a parent or family whose young driver is away at school without a car
- two or more cars on a policy
- policy renewal with good claims and driving records
- a concurrent homeowners policy.
Your might also qualify for a discount if your car has:
- airbags and automatic seatbelts
- automatic daytime running lights
- antilock brakes
- antitheft devises
Homeowners Insurance
You can buy a policy that covers only your house, but most homeowners buy a policy that combines five coverages:
- Dwelling pays if your house is damaged or destroyed. It also pays for unattached structures and buildings, such as fences, detached garages, and storage sheds.
- Personal property pays if the items in your house (such as furniture, clothing, and appliances) are damaged, destroyed, or stolen.
- Liability provides $25,000 in coverage if you are sued and found legally responsible for someone else’s injury or property damage. You may purchase up to $1 million in coverage.
- Medical payments pays the medical bills of people hurt on your property. It also pays for some injuries that happen away from your home, such as your dog biting someone. A basic homeowners policy pays $500 in medical bills but you can buy up to $5,000 in medical payments coverage.
- Loss of use pays your additional living expenses (temporary housing, food, and other essential expenses) if you must temporarily move while repairs are made to your house. Most policies pay 10 to 20 percent of the amount of your dwelling coverage.
The types of policies sold in Texas include:
- HO-A policies provide limited actual cash value coverage of your home and its contents. Only the types of damage listed in the policy are covered.
- HO-A amended policies provide more coverage than the HO-A policy but less than an HO-B. Coverages provided by HO-A amended policies vary by company.
- HO-B policies provide replacement cost coverage for most types of damage, except those specifically listed in the policy as being excluded. Generally, HO-B policies provide the most coverage for the price, but some companies do not offer the HO-B policy.
- HO-C policies provide the most extensive coverage, but they are more expensive.
Approved alternative policies offer varying levels of coverage and are different from one company to another. Companies can only sell alternative policies that are approved by the commissioner of Insurance.
Replacement cost and actual cash value
Replacement cost is what you would pay to rebuild or repair your home, based on current construction costs. Replacement cost is different from market value and does not include the value of your land. Ask your company if you are not sure how much it would cost to rebuild your house.
To receive full payment (minus your deductible) for a partial loss, such as a hail-damaged roof, most companies require you to insure your house for at least 80 percent of its replacement cost. If you insure your house for less than 80 percent of the full replacement cost, the insurance company will only pay a portion of the loss. Some companies require you to insure your house for 100 percent of its replacement cost.
Actual cash value is the replacement cost of your property minus depreciation. If your home is destroyed and you only have actual cash value coverage, you may not be able to completely rebuild.
Household contents are typically covered on an actual cash value basis. If your policy does not already provide coverage for personal property on a replacement cost basis, you can buy replacement cost coverage for an additional premium.
Even if you have replacement cost coverage, most insurance companies will initially pay for a loss on an actual cash value basis. The company will pay any additional costs associated with the replacement cost of your damaged property once repairs have been made to the property, or the damaged property has been replaced.
Read your policy carefully to know exactly what coverages are included. If a company offers you a policy with less coverage than you’d like, ask if other policy forms are available. You also may be able to buy additional coverage by adding endorsements to the base policy.
For a comparison of the policy forms approved for sale in Texas, visit the OPIC's website.
www.opic.state.tx.us
Other Types of Insurance You Might Need
Depending on where you live and what you’re insuring, you might want to consider the following types of insurance to supplement your residential policy:
- Flood insurance: Homeowners policies do not cover flood damage. To protect yourself from losses caused by most flooding, you can purchase a separate flood insurance policy from the National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA). For more information, contact NFIP at 1-800-427-4661 or
www.floodsmart.gov - Hurricane and windstorm insurance: The Texas Windstorm Insurance Association (TWIA) is the state’s insurer of last resort for wind and hail coverage in the 14 coastal counties and parts of Harris County on Galveston Bay. TWIA provides wind and hail coverage when insurance companies exclude it from homeowners and other property policies sold to coastal residents. You can buy TWIA coverage through local insurance agents if you need it. For more information about windstorm coverage, contact TWIA at 1-800-788-8247 or www.twia.org.
- Personal umbrella liability insurance: If you have assets to protect and want more liability coverage than a homeowners policy provides, you can buy a separate umbrella policy. Make sure your agent or company fully explains the coverage.
Factors that Affect Your Premium
Your premium will be based on several factors. These include:
- where you live
- availability of local fire protection
- age and condition of your home
- construction materials used in your home (brick or frame)
- your claims history
- your credit score
- the type of policy you purchase
- the amount of coverage you buy.
Deductibles
Your deductible is the amount that you must pay out-of-pocket before the company will reimburse for your loss. Texas homeowners policies generally carry a standard deductible of 1 percent. This amount is a percentage of the insured value of the dwelling, and not a percentage of the amount of the loss. For example, a 1 percent deductible on a home insured for $100,000 would be $1,000.
If you live on the coast, be aware that many companies have a separate “Named Storm” or hurricane deductible that is higher than your standard deductible (anywhere from 2 to 5 percent). This deductible will apply to any damage caused by a named storm or hurricane.
Some companies offer optional deductibles as high as 5 percent and as low as $100. You may be able to choose a higher or lower deductible and doing so will affect your premium. A higher deductible will lower your premium, but you’ll have to pay more out of your own pocket if you have a claim.
Ask about Discounts
Companies may offer premium discounts if you take steps to reduce the chances of a loss. Each company sets the amount of the discounts it offers. Following are some of the more common homeowners discounts available:
- impact-resistant or noncombustible roofs
- burglar, fire, and smoke alarm systems
- automatic sprinkler systems
- fire extinguishers
- premises in good condition (companies set their own standards)
- age of house (companies set own standards)
- marking personal property with an identifying number (inspection required)
- good claims experience for three consecutive years
- other policies with same company or group
- house insured to full replacement cost
- senior citizens discount.
Renters Insurance
If you rent an apartment or other dwelling, your landlord’s insurance will not cover your personal if they are stolen, damaged, or destroyed. Renters insurance covers household goods and personal property and also provides liability coverage.
Insurance companies can sell several types of renters policies in Texas. Read your policy carefully to know exactly what it covers.
Renters Insurance Coverages
Renters insurance policies typically include three types of coverages: personal property coverage, loss of use, and personal liability.
- Personal property coverage pays to repair or replace your personal property, up to your policy’s dollar limit. In addition to a total dollar limit, policies may limit payments for certain kinds of property. Common limits are $100 for cash, $2,500 for personal property used for business, $500 for valuable papers, and $500 for jewelry, watches, and furs.
Renters insurance also covers your luggage and other personal items when you travel. This coverage is usually limited to 10 percent of the amount of your policy or $1,000, whichever is greater. - Loss of use pays for additional living expenses, such as food and housing, if you must move from your home or apartment. Loss of use coverage is generally limited to 20 percent of a policy’s personal property coverage. For example, if you have $25,000 in personal property coverage, your loss of use coverage would be $5,000.
- Personal liability protects you against a claim or lawsuit if someone is injured on your property. A renters policy typically automatically provides $25,000 in liability coverage and pays your legal costs. Extra liability coverage is available for additional premium.
Renters policies typically only pay the actual cash value of your losses. Replacement cost coverage is available for an extra premium.
Note: Renters insurance may duplicate other coverage. For instance, if you are still a dependent, your personal property may be covered by your parents’ homeowners policy. This coverage is limited to an amount equal to 10 percent of the total personal property coverage provided by the policy.
Having Trouble Finding Insurance?
Texans having trouble finding insurance from licensed companies may have other options for obtaining coverage. The following programs may be able to help:
Helpinsure.com
Helpinsure.com is a free and secure service of TDI and the Office of Public Insurance Counsel (OPIC) to help Texans shop for automobile, homeowners, condo, and renters insurance. You can view sample rates for companies writing new homeowners insurance in your area, compare policy coverages, and view company profiles that show a company’s history, complaint index, and financial rating from an independent rating organization.
You can either contact companies yourself or complete a secure application that companies and agents can access to call you with a rate quote. For more information or to sign up, visit the Helpinsure.com website or call the Consumer Help Line.
Texas FAIR Plan Association
The FAIR Plan provides the standard Texas HO-A homeowners insurance policy form. To be eligible for coverage, you must have been denied insurance by at least two licensed insurance companies writing residential property insurance in Texas and may not have received a valid offer of comparable insurance from a company licensed in Texas. For more information, contact your agent or the Texas FAIR Plan
1-800-979-6440
www.texasfairplan.org
Texas Automobile Insurance Plan Association (TAIPA)
If you can’t find auto insurance from a licensed company, you might be able to buy coverage through TAIPA. TAIPA provides basic liability insurance, PIP, and UM/UIM coverage to drivers rejected by insurance companies. TAIPA doesn’t provide collision or comprehensive coverage or higher liability limits than the law requires.
TAIPA rates are higher than those of most standard companies, but may be lower than the rates charged by county mutuals for high-risk drivers. For more information, call TAIPA or visit its website
1-866-321-9154
www.taipa.org
Surplus Lines Carriers
Consider a surplus lines company if you’re still unable to find insurance. Surplus lines companies are out-of-state companies not licensed in Texas, but legally allowed to sell insurance in the state on a surplus lines basis. Surplus lines companies generally charge more than licensed companies and often offer less coverage. In addition, there is no guaranty association to cover their claims if they become insolvent.
Before you buy a surplus lines policy, make sure there are no other options. Agents must make an effort to find coverage with a licensed company before offering you a surplus lines policy. Ask which licensed companies turned you down, and why. Companies must explain rejections.
Your Rights against Unfair Discrimination
An insurance company may not deny, refuse to renew, limit, or charge more for coverage because of your race, color, religion, or national origin.
A company also may not deny, refuse to renew, limit, or charge more for coverage because of your age, gender, marital status, geographic location, disability or partial disability, unless the refusal, limitation, or higher rate is “based on sound underwriting or actuarial principles.” This means the company must show valid evidence that you present a greater risk for a loss than others it is willing to insure.
In addition, a company may not discriminate in its rates, policy terms, benefits, or any other way between people in the same rate class and with similar risks unless the refusal, limitation, or higher rate is “based on sound actuarial principles.”
Consumer Complaints
If you believe an insurance company has treated you unfairly, first discuss your concerns with the company. Most companies have a toll-free telephone number to provide customer assistance. The number should be listed in your policy. If you’re unable to resolve the issue with the company, you may file a complaint with TDI.
For More Information or Assistance
For answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website
1-800-252-3439
463-6515 in Austin
www.tdi.texas.gov
You can also visit HelpInsure.com to help you shop for automobile, homeowners, condo, and renters insurance, and TexasHealthOptions.com to learn more about health care coverage and your options.
For printed copies of consumer publications, call the 24-hour Publications Order Line
1-800-599-SHOP (7467)
305-7211 in Austin
Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line
1-888-327-8818
To report suspected arson or suspicious activity involving fires, call the State Fire Marshal’s 24-hour Arson Hot Line
1-877-4FIRE45 (434-7345)
The information in this publication is current as of the revision date. Changes in laws and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an endorsement by TDI of any service, product, or company.
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