Home Insurance in Texas

Key Points

• Home insurance provides coverage for homeowners, renters, and landlords, protecting their homes, personal belongings, and providing liability coverage.
• Standard home insurance covers damages from theft, fire, smoke, vandalism, windstorms, hurricanes, and hail (except in at-risk areas like the Gulf Coast), but does not cover flood which enters the home from the outside, which require a separate or an add-on flood policy.
• The Texas Department of Insurance (TDI) regulates home insurance in the state, issuing licenses to insurance agents and approving rates for insurance companies.
• Average (non-discounted) homeowners insurance in Texas ranges from $3,400 to $4,200 per year (or $1,700 - $2,100 with discounts), while average renters insurance costs $20 to $25 per month.
• When shopping for coverage, always compare multiple quotes.

Overview of Residential insurance in Texas

Home policy insurance refers to any policy that covers residential property: damage to personal property, personal liability, or legal responsibility for any injuries inflicted and damage to property of others caused by individuals or their families.

The Texas Department of Insurance (TDI) is the regulatory body for insuring home in Texas. TDI issues licenses to property insurance agents and also approves all the rates for home insurance companies that offer coverage in the state.

Here are the top insurers offering home insurance to the residents of Texas:

The various types of home insurance coverage in Texas include but are not limited to dwelling coverage, personal property coverage, other structures coverage, loss of use coverage, personal liability coverage, and medical payments coverage. Residential insurance can be purchased by owners of the property and by their tenants. In 2023:

• Average Homeowners insurance in Texas is $3,400-$4,200 per year, or $283-$350 per month - without discounts,
• Average Landlords insurance in Texas is $3,740-$4,620 per year, or $311-$385 per month - without discounts.

You can typically lower your cost by up to 50% if you combine various policies and apply safety discounts. Discuss all the applicable options with your agent.

1. Average Renters insurance in Texas costs $20-$25 per month ($240-$300 per year), but coverage is possible for as low as $5 per month ($60 per year)

A typical home insurance covers damages from theft, explosion, fire, lightning, smoke, vandalism, riots, aircraft, and vehicles. Additionally, it covers damages from windstorms, hurricane winds, and hail, but this does not apply to individuals who live in at-risk areas like the Gulf Coast. Home insurance does not cover damages caused by flood, earthquake, wear and tear, insects and wind, or hail to trees and shrubs.

**Discuss your home insurance needs with a licensed Texas property insurance agent. Their professional advice doesn't cost you anything. Use the quote comparison worksheets to help choosing the right policy for your needs (Homeowners / Renters) **

Why Do We Need Home Insurance in Texas?

In 2023, there were nearly 12 million housing units in Texas, with 62% of them owner-occupied and 38% available for rent. Median value of a Texas home in 2023 was over $200,000, with the numbers continuing to go up. According to the Texas A&M Real Estate Research Center, over 51% of home sales in 2021 were in the $200,000 - $399,999 range.

Rural counties tend to have higher percentages of housing units as owner-occupied. For instance, Terrell County has up to 93% of its housing units as owner-occupied. On the other hand, in Kenedy County, which has the highest number of renters in Texas, nearly 77% of its housing units are rental units. While renters are not responsible for insurance on a rental property structure, rental home insurance will cover the renters personal belongings and liabilities, which are not covered by the landlord’s building coverage.

The most common causes for home insurance claims in Texas are:

• Wind and Hail damage claims
• Fire and Lightning damage claims
• Water Damage from Leaks
• Liability claims for Property Damage
• Home Theft and Break-ins Claims
• Liability claims for Bodily Injury (including Medical expenses)

During the cold winter events, which are known to wreak havoc on the Texas electric grid, resulting in rolling blackouts, there is usually a spike in the claims from:

• Plumbing Damage from Freezing Water

These statistics show the need for insurance coverage for both homeowners and renters. Consequently, there are several reasons why residential property insurance is beneficial to both homeowners and renters.

These reasons why we need home insurance in Texas include the following:

• Properly structured home policy insurance provides coverage to people's homes against losses and damages from earthquakes, floods, lightning, storms, theft, and vandalism.
• Besides providing coverage for the structure of the buildings, residential property insurance also provides coverage against loss or damage of contents like jewelry, clothes, furniture, appliances, and other personal belongings kept in the insured home. Home insurance policy can be further enhanced with a personal effects insurance, which would cover the valuables if they were worn and then damaged or lost.
• It gives individuals a sense of safety whenever property damage occurs to their properties.
• It provides personal liability coverage that covers homeowners and renters against personal injuries, property damage to guests, and other third parties they might have incurred while residing in the insured house.
• It covers additional living expenses individuals may incur if they have to move out of their home due to damages.

How Does Residential Property Insurance Work in Texas?

The Texas Department of Insurance (TDI) regulates insurers and other companies that conduct home insurance business in the state, sets the rates, and provides assistance to Texas-based insurance consumers.

This regulation is necessary considering the growing number of insurance companies as well as insurance-based businesses in the state.

In 2020, Texas had 1,168 Property and Casualty insurance companies offering coverage to the state’s residents. Out of those, 198 were domestic (where the company is domiciled in TX) and 970 were foreign (domiciled in other states or countries). As of mid 2023, there were over 84 thousand state-licensed Property and Casualty insurance agents.

As of 2023, the total amount of direct P&C Insurance premium written in Texas annually is around $64-$65 billion, which is significantly higher than neighboring states like Louisiana, Arkansas, Oklahoma, and New Mexico combined. Nationwide, Texas accounts for the second-largest amount of the P&C direct premiums written, after California. Out of all direct premiums written in the state, around 17% of the total goes toward Residential P&C insurance in Texas.

Additionally, Federal flood coverage accounts for approximately 1% of state P&C and Private home flood insurance account for 0.10% of the total P&C market in Texas.

Residential property insurance in Texas works as a policy that helps insuring the home where insurance holders live, as well as their personal belongings. Home insurance policy may be purchased from Texas-licensed insurance agents and companies licensed by the Texas Department of Insurance (TDI).

HOME COVERAGE VALUATION

All Texas home insurance policies are based on the valuation of the insured property and it is very important to keep the valuation current. Otherwise you risk being underinsured.

The chosen valuation method determines the:

• Maximum amount of money you can get from a home insurance claim and
• Cost of the home insurance coverage.

ACV vs RC

Texas home insurance companies can insure property on the basis of:

• Actual Cash Value (ACV) or
• Replacement Cost Value (RCV, or RC).

To determine the ACV of an item, the original (brand-new) price of the item is discounted due to time depreciation, tear and wear, and normal use. Replacement Cost (RC) is determined based on the current market cost to replace the item with a brand new or equal one. ACV in insurance valuation is usually lower than RC valuation and therefore offers cheaper home insurance coverage. But cheaper is not always better. For example:

Actual cash value insurance on a Texas home can lead to underinsurance, which can be devastating during a claim. When the construction costs in the area go up, so does the cost to repair the damaged home. If the home is insured using ACV valuation, it does not account for such market fluctuations and the structure is discounted based on its age and wear. On another hand, an RCV insurance claim on that same home will guarantee the full Rebuild Cost. The home can be rebuilt to the same specifications - up to the policy limit.

The same applies to the belongings inside your home. Do not expect to replace your damaged or stolen TV with the same current model if it was insured using ACV valuation. You will get a fraction of the cost, in line with what it costs to buy your old TV in a pre-owned condition. If the same TV is insured using Replacement Cost basis, an RCV insurance claim will buy you a new TV.

Discuss valuation of your property with a Texas-licensed property insurance professional.

CONSUMER RIGHTS

Prior to buying a home insurance policy from a Texas-licensed agent, you can verify the status of their license and see which of the companies they may represent. This way you know how many competing quotes the agent is capable of delivering out of the over 1,000 possible options in Texas. If you are unable to obtain home insurance coverage from standard P&C insurance companies in TX, you can reach out to the Texas FAIR Plan Homeowners Insurance. Texas FAIR Plan Association is a residual market insurer, which will insure your home only if you have been denied coverage by at least 2 standard insurers.

See the Texas Consumer Bill of Rights for more information, in English and in Spanish:

• CONSUMER BILL OF RIGHTS: Homeowners, Dwelling, and Renters Insurance
• DECLARACIÓN DE DERECHOS DEL CONSUMIDOR: Seguro de hogar, de propiedad residencial y para inquilinos

CLAIMS

It is very important for individuals to file their claims with their home insurance companies as soon as their building structures or properties sustain any damage.

The home insurance company must let the insured individuals know they received their claims and begin an investigation within 15 days after a claim has been filed. The insurance company also has the right to ask for any supporting information they need from the insured. Home insurers must either approve or deny the claim in writing within 15 business days after all necessary information has been obtained from the insured. If the Texas home damage claim is approved, the insurance company must pay the claim within 5 business days.

If your Texas home insuring company requires more time to process the claim, they can extend the response time by an additional 30 days - for a total of up to 45 days. To do so, the insurance company must inform you about it and provide clear reasons for this delay.

Individuals who are unsure of the information on their policies should make inquiries with their insurance agents or companies.

For more information regarding the regulation of residential property insurance, contact an insurance agent licensed by the Texas Department of Insurance (TDI).

As an alternative, you can also contact the Texas Department of Insurance at (800) 252-3439 or the Office of Public Insurance Counsel (OPIC) at (877) 611-6742 or email.

What Are The Types of Residential Insurance in Texas?

Residential insurance primarily covers 3 things:

• Damages to the building individuals live in,
• Property contained inside and/or outside the residential dwelling, and
• Injuries sustained by third-parties on the property or in relation to the insurance holder.

There are different types of residential insurance in Texas. The type you need to purchase largely depends on what you want to protect and whether you rent or own the property.

The most common types of residential insurance in Texas are:

• Homeowners insurance
• Condominium insurance (Walls in Insurance & Condo Association Master Policy)
• Rental Property insurance (Renters insurance / Landlord insurance)
• Personal Liability coverage insurance
• Mobile home insurance
• Farm and ranch insurance

Residential insurance in Texas is divided into 2 main types of coverage, based on what it protects:

1. Property Coverage: protects against damage to personal property, such as fire, theft, and some weather damage, or
2. Liability Coverage: provides an insured party with personal liability protection against claims resulting from injuries and damage to other people or property.

Furthermore, the coverage is divided based on the ownership of the home and the occupancy status. All these types of Texas home insurance offer both the property and liability aspects of insurance coverage:

OWNER of the Property

HOMEOWNERS insurance is a form of Texas property insurance policy that covers damages from fire, tornadoes, hailstorms, theft, and other incidents that occur in a private residence. Homeowners insurance can be purchased only by the owner of the property, or someone who is paying the mortgage on the insured home, and resides in the home full time. Over 7.5 million Texas homes are occupied by owners and are in need of homeowners insurance.

Most homeowner insurance policies in Texas do not cover damages from external floods, earthquakes, termites, insects, and rodents. They also do not cover damages caused by a continuous water leak and failure on the homeowner's part to carry out routine maintenance on the property.

Most Texas homeowners insurance policies include the following coverages:

• Dwelling coverage: Texas dwelling policy covers a home after it has been damaged by a covered peril such as, but not limited to fire, wind, hail, and lightning.
• Personal property coverage: compensates homeowners for personal items like furniture, clothing, and other things that are stolen, damaged, or destroyed in a covered loss.
• Other structures coverage: OSC covers replacement or repair of structures on the homeowners' properties that are not attached to their house. This typically includes fences, detached garages, and storage sheds.
• Loss of use coverage: LOU covers payment of additional living expenses and temporary housing to homeowners if they have to live somewhere else while their houses are being repaired to fix damages their policy covers. Additional living expenses include food, rent, and other costs homeowners would not incur if they were still in their homes. Loss of use coverage is typically limited to 20% - 30% of the dwelling coverage amount.
• Personal liability coverage: this covers payment of medical bills, lost wages, and other costs for individuals that the homeowner is legally responsible for injuring. It also covers homeowners if they are responsible for damaging someone else's property. Additionally, liability coverage pays the court and other legal costs of individuals if they are sued on account of an accident.
• Medical payments coverage: provides additional liability coverage by paying the medical bills of people hurt on homeowners' properties. It can also cover certain injuries that happen away from home, for instance, in the event that the individual's dog bites someone at the park.

CONDO insurance: Texas condo insurance, also referred to as walls in insurance, covers the interior of their condo units from damages caused by theft, smoke, fire, vandalism, and sudden water damage. It also provides personal liability coverage and pays additional living expenses. Most standard condo insurance in Texas does not cover damages due to lack of maintenance, floods, earthquakes, and water backup, unless separate coverage is purchased.

LANDLORD insurance: typically, Texas rental property insurance covers the home and other structures on the property, such as sheds or fences, from damages caused by fire, lightning, wind, hail, and other covered losses. Rental home insurance also provides coverage for items used to service the rented property.

COMMERCIAL PROPERTY insurance: is used to insure property in multi-dwelling units, most commonly apartment complexes. There are around 2 million multi-dwelling units across Texas.

Similarly to homeowners and landlord insurance, commercial property insurance policy protects multi-dwelling buildings and supporting properties damaged by fire, explosions, burst pipes, storms, theft, and vandalism. Additionally, commercial property insurance can pay for some of the lost income if the property is damaged and the tenant had to move out, and pay for personal liability and medical expenses if someone gets hurt on the property. However, most commercial property insurance does not cover damages caused by earthquakes and floods. That requires a separate flood insurance policy and/or earthquake policy to be added.

RENTER of the Property

RENTER insurance: this is also called tenant insurance or home insurance for rented property. Texas renters insurance provides some of the benefits of home insurance but does not cover the dwelling or structure since renters do not own the building they live in. Although renters insurance isn't mandatory in Texas, landlords might require tenants to have it. Most renter insurance protects renter's belongings from theft or damages due to fire, smoke, theft or vandalism, and certain kinds of water damages, but they do not cover losses due to floods. Dependents of homeowners do not need renter insurance. Their parents' homeowners insurance policy will cover their belongings even if they are not living at home. On average, Texas renter insurance typically costs about $20 monthly. Renters insurance typically includes three types of coverage:

• Personal property coverage: personal effects insurance covers renters' belongings, including items stolen from their cars or while traveling.
• Loss of use: this covers renters' additional living expenses if they have to vacate their apartment for a short time because of damages from a covered loss.
• Personal liability: protects renters if a third party is injured in their homes and pays legal costs if they are held liable and taken to court.

PROPERTY - Residential Insurance in Texas

Property insurance in Texas is a type of insurance policy that can provide coverage for property owners or renters against damages caused by fire, theft, smoke, wind, hail, and lightning (NOTE: Flood and Earthquake coverage are purchased separately or as add-ons).

The needed residential property insurance varies depending on whether the insured is the owner of the house (and the house is owner-occupied or for rent) or a renter. The coverages needed in either case are as follows:

• Coverage for Owning a Home: individuals who own and occupy their home should get homeowners coverage, condo coverage, and the needed disaster coverage such as flood insurance and earthquake insurance (based on the address' threat profiles). Homeowners insurance does not cover costs of replacing the tenant’s property and if someone else gets hurt or causes damage on a rented property. Hence, homeowners who rent out their homes should get landlord coverage.
• Coverage for renters: landlord insurance does not cover the personal properties of renters. So, renters should ensure they get renters insurance to protect their belongings in the rented property from theft or damages.

LIABILITY - Residential Insurance in Texas

Liability insurance is a type of insurance policy that protects individuals against claims resulting from injuries and damage to other people or property.

It is important for both owners and renters to have liability coverage. This is because owners' liability insurance would not cover renters whenever they accidentally cause harm to others and vice versa. Owners should consider getting homeowners liability insurance, condo liability insurance, and landlord liability, while renters should get renter liability insurance.

What commonly insured risk would be covered by liability insurance in Texas?

Most commonly insured risks for residential property liability insurance are Bodily injuries, Property damage, and Libel. If the damage or injury is caused to someone on your own or rented property - you may be found liable. Most common residential liability claims come as a result of: slips, trips, and falls, falling trees, dog bites, swimming pools, and injured workers.

• Homeowners Personal Liability coverage: this type of insurance covers property owners when a claim is filed against them for injury or property damage caused to a third party. It also covers damages caused by the insured's pets.
• Condo Personal Liability Insurance: this protects individuals financially from bodily injury or property damage they cause to others.
• Landlord Personal Liability Insurance: this protects landlords financially against liability claims from a tenant or guests of the property. Landlord’s personal insurance coverage pays medical bills and legal fees that might arise from the injuries sustained by tenants or guests on the rented property.
• Renter Personal Liability insurance: this policy covers individuals renting a property whenever they cause harm to others by accident or through negligence. Most importantly, renters of single-family dwellings are typically responsible for the upkeep of the grounds. So, if a tree falls down a car parked in the driveway, or if a worker slips and falls on the icy sidewalk - renter’s personal liability coverage will help them pay for the damages.

Homeowners Insurance vs. Condo Insurance: How Are They Different?

The difference between homeowners insurance and condo insurance in Texas is in the amount of property the policies are designed to cover. Homeowners insurance covers damages done to a house and other structures on the property (sheds, fence, etc). In contrast, condo insurance covers damages to the interior of the individuals' unit(s) and their personal belongings. This is the reason why condo insurance is called “walls in insurance”. The structure of the condo building is covered by the Condominium Association’s Master Policy.

How Much Home Insurance Coverage Do I Need in Texas?

It is not mandatory for homeowners to have home insurance coverage in Texas if he home is owned outright. However, lenders will require individuals who owe money on their homes to have it. Although having home insurance is not legally required, it is advisable for homeowners to get their homes insured because it provides financial protection as well as risk coverage for their homes. There are different forms of home insurance coverage that offer various levels of protection depending on the needs of the individuals and the type of residence being insured. Hence, homeowners should do their due diligence to buy the right kind and amount of home insurance for their homes.

As explained earlier, the amount of coverage depends on the valuation of the property, based on either the Replacement Cost or Actual Cash Value (RC vs ACV). RC insurance claim will pay for the replacement cost of the item, while ACV insurance claim depreciates the RC of the property based on its condition, age, and wear and tear.

When making considerations on what home insurance coverage to go for, it should, ideally, be enough to cover the cost of:

• Rebuilding the home.
• Replacing personal properties.
• Treatment of injuries and damages that might happen on the property (liability).
• Reimbursing homeowner's living expenses after the loss of an insured home.

To get insurance home quotes, discuss your home property valuation with a Texas-licensed property insurance professional. A knowledgeable agent can help you figure out how much coverage is needed based on your needs.

Can You Over Insure a Residential Property in TX?

Over-insurance can occur when individuals buy insurance coverage that exceeds the property's actual value or replacement cost.

For instance, getting $300,000 worth of home insurance for a house with a market value of $200,000 is considered over-insurance, unless construction of this home is expected to cost this much. Ideally, when insuring a home, insurance coverage limits should be able to cover the cost of rebuilding your home from scratch at current construction costs. Anything above that is over-insurance.

If you are renting a home and you over-insure your belongings - you are wasting money by paying too much for your annual premiums. In case of a claim, the insurer will pay only the Actual Cash (Depreciated) Value or the Replacement Cost (full cost) of the damaged or stolen property. You cannot make money on insurance. It is meant to put the insured party back into the same state they were in before the claim.

Speak with a state-licensed home insurance professional for more details.

Can You Under Insure a Residential Property in Texas?

A residential property can be underinsured, and individuals might not know this until it is too late. Underinsurance occurs when homeowners and renters don't have enough home policy insurance coverage to protect them in the event of incurred property damage on the home or the belongings. Underinsurance can result in homeowners and tenants paying a large part of the replacement or repair construction costs for damaged property out-of-pocket. Underinsurance in Texas home insurance typically comes in two forms;

1. Underestimating the value of the building and the personal possessions - which leads to not enough coverage limits being purchased,
2. Overestimating the deductible - higher deductible leads to the insured paying much more out of of pocket then they would have - if the policy was properly structured,

For example, if your house is insured for $240,000 and at the current construction prices it costs $300,000 to rebuild, if completely destroyed, where do you plan to get the missing $60,000?

On another hand, if your home is insured for $500,000 with a 3% wind and hail roof deductible, and hail damages your roof - your deductible portion of the bill is $15,000. Considering that most roofs in Texas cost $10,000 - $15,000 to replace, your home in this situation is underinsured based on the deductible, because you would be paying for the roof replacement out of pocket. The insurance company will pay only for the damages above the $15,000.

If you rent a home or an apartment and you underestimate the value of your property, if it is damaged or lost, the claim will get paid based on the insured value. The trick is in insuring for the right amount, without over-insuring and under-insuring. This is why you should review the coverage options and amounts with your trusted insurance agent annually.

Here are some tips that could help with maintaining the right amount of home insurance coverage:

• Entering the value of your home based on market, appraised or assessed value is wrong. It is best to insure your home using the rebuild value.
• Talk to your Texas-based licensed Property and Casualty (P&C) insurance professional to analyze your needs and figure out the cost of rebuilding your home. Most Texas insurers monitor the real estate market and are aware of the changes in the valuation. Make sure to update it annually.
• Ensure your insurance coverage limits are sufficient to meet the cost of rebuilding your home.
• Always review your home insurance policies every year to ensure your owned or rented home is not underinsured.

Related Articles and Tools

Texas home insurance 101

Why Do I Need Insurance For My Home in Texas?

What is Covered by Home Insurance In Texas? - Frequently Asked Questions

Homeowners insurance in TX

Renters insurance in TX

Landlords insurance in TX

Condo insurance

Mobile home insurance

Disaster Insurance in Texas

PRINTABLE WORKSHEETS

Homeowners insurance quote comparison worksheet

Renters insurance quote comparison worksheet