Insuring Your Texas-Built Home

If you've built a house in Texas, you may be wondering how to insure it. While Texas law doesn't require you to have home insurance, it's still a good idea to protect your home and assets. Home insurance covers the cost of repairs or replacement if your house or property is damaged or destroyed by something covered in your policy, like a fire or storm. There are two main types of home insurance policies: replacement cost coverage and actual cash value coverage. Replacement cost coverage pays to repair or replace your house and property at current prices, while actual cash value coverage pays replacement costs minus depreciation. In addition to standard home insurance, you may also want to consider builder's risk insurance, which covers theft of materials, vandalism, fire, and other risks during construction.

Builder's risk insurance

Builders Risk Insurance

The cost of builder's risk insurance can be anywhere from 1% to 4% of the construction budget, depending on factors like the replacement cost of your completed home, square footage, and the materials used. Policies are generally written for 9 to 12 months and can be renewed if there are construction delays.

• Vehicle or aircraft collision
• Fire
• Flood
• Theft or vandalism
• High winds and storms

There are some exclusions to what is covered by builder's risk insurance. These include:

• Earthquakes
• Employee theft
• Mechanical breakdowns
• Government action
• War
• Acts of terrorism
• Workmanship
• Fault design
• Wear and tear

In Texas, high winds are typically covered by builder's risk insurance. However, some areas, such as beachsideside properties, may exclude this peril from their list of coverable events.

Home insurance options

Home insurance is not a legal requirement in Texas, but it is a good idea to have one as it helps protect your home and other assets. If you are still paying off your mortgage, your lender will require you to have home insurance.

There are several types of home insurance coverages to choose from, and most home policies in Texas include six coverages:

• Dwelling coverage: Pays for repairs or rebuilding if your house is damaged or destroyed by something covered in your policy.
• Personal property coverage: Pays for your furniture, clothing, and other belongings if they are stolen, damaged, or destroyed.
• Other structures coverage: Covers the repair of structures on your property that are not attached to your house, such as detached garages, storage sheds, and fences.
• Additional living expenses coverage: Covers rent, food, and other costs if you have to move out while your house is being repaired due to covered damages.
• Personal liability coverage: Pays medical bills, lost wages, and other costs for people you are legally responsible for injuring, as well as damage to someone else's property. It also covers your court costs if you are sued due to an accident.
• Medical payments coverage: Pays the medical bills of people who are injured on your property, including some injuries that occur away from your home, such as a dog bite in the park.

You can also purchase separate policies or add-ons to your existing policy for additional protection, such as flood insurance or windstorm insurance. Texas is prone to hurricanes and storms, so it is important to consider this when choosing your home insurance policy.

When shopping for home insurance in Texas, be sure to ask about discounts and compare quotes from multiple companies to find the best coverage for your needs and budget. You can use an independent agent who sells insurance for several companies to shop around for you.

Title insurance

There are two main types of title insurance policies in Texas: the owner's policy and the lender's policy. The owner's policy is not mandatory but is strongly recommended as it offers substantial protection for the homeowner. It shields against financial losses that may result from problems such as legal claims due to previously existing liens on the property, discrepancies in public records, other types of liens, and encroachments onto the property. The coverage provided by an owner's title policy extends to various defects related to ownership documentation.

On the other hand, the lender's policy is required for mortgages to protect the lender's stake. It safeguards the interests of the mortgage provider in a property by ensuring an ongoing defence against any imperfections or legal claims that could affect the lender's investment. Within Texas, such insurance guarantees both the priority and legitimacy of the lender's lien on the real estate asset.

The cost of title insurance in Texas depends on the value of the property and usually falls between 0.5% and 1% of its purchase price. It is included in the overall closing costs for the property. Both buyers and sellers have the opportunity to negotiate which party pays for the title insurance. Typically, sellers assume the costs associated with providing an owner's title insurance policy, while buyers usually pay for the lender's policy.

Flood insurance

Texas is particularly prone to flooding, especially in two large parts of the state: the coast and a wide band called Flash Flood Alley, which extends through Central and North Texas. Almost every major city in Texas is in an area at high risk of flooding.

Most home insurance policies do not cover flood damage, so you will need a separate flood policy to ensure your property is covered. If your home is in a designated flood zone, your lender will require you to have flood insurance. A flood zone is an area that has a 1% chance of being flooded in any given year. However, floods can happen anywhere, and on average, 40% of the National Flood Insurance Program (NFIP) flood insurance claims occur outside of high-risk flood areas.

A flood insurance policy will cover your home up to $250,000. You will need a separate flood policy for your personal belongings, which provides coverage up to $100,000. Flood insurance policies usually cover electrical and plumbing, heating and air units, and certain items in the basement, such as water heaters, furnaces, washers, and dryers. However, carpeting and wall finishing are not covered, nor is other personal property.

Most flood policies have a 30-day waiting period before they take effect, so it is important to plan ahead and not wait for a storm to be approaching before purchasing coverage. You can purchase flood insurance through the NFIP or from your insurance company or agent.

Windstorm insurance

If you live in Texas, except along the coast, your homeowners' insurance policy will typically cover wind and hail damage. However, if you live in one of the 14 counties that border the Gulf Coast, you will need to purchase a separate windstorm insurance policy as standard home insurance policies do not cover wind damage in these high-risk areas.

Texas Windstorm Insurance Association (TWIA)

If you are unable to obtain windstorm insurance through a private insurance company, you can turn to the Texas Windstorm Insurance Association (TWIA). TWIA offers insurance to homes in high-risk counties that cannot get standard coverage. Their policies cover dwelling, personal property, and miscellaneous items, as well as commercial buildings, manufactured homes, condos, and townhouses. To be eligible for TWIA coverage, you must live or own a business in their service area and have been denied wind and hail coverage by an insurance company. Additionally, your home must be built and maintained according to certain construction codes.

Cost of Windstorm Insurance in Texas

The cost of windstorm insurance in Texas varies depending on factors such as the construction type of your home, the deductible you choose, and the coverage amount you select. The average TWIA policy costs around $1,850 per year, but rates may increase in the future to remain adequate.

Frequently asked questions