Shopping Smart Tips for Texans Purchasing Auto, Homeowners & Renters Insurance from the Texas Department of Insurance

Shopping Smart Tips for Texans Purchasing Auto, Homeowners & Renters Insurance

(June 2010)

Shopping for an insurance policy 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 reduce your premium and get a better deal on automobile, homeowners, and renters insurance.

Know Your Rights

All auto and homeowners policies in Texas must include a Consumer Bill of Rights, which explains your legal rights and responsibilities. Read it carefully. You can also view the Consumer Bills of Rights for both types of policies on the Texas Department of Insurance (TDI) website

www.tdi.state.tx.us

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 may 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.
Ask several companies and agents for price quotes. When comparing rates, make sure they are for the same coverages. TDI publishes sample rate comparisons for auto and homeowners insurance. You can also compare auto, home, and renters sample rates online at www.helpinsure.com. You can also use the Shopping for Home Insurance Company/Policy Comparison Worksheet and the Shopping for Auto Insurance Company/Policy Comparison Worksheet at the back of this publication to help you gather information about companies and the policies they offer.
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.
Buy only from licensed insurance agents and companies. Most licensed companies must belong to a guaranty association that pays claims for its member companies that become insolvent. You can learn a company’s complaint history, financial rating from an independent rating service, and license status by calling the Texas Department of Insurance (TDI) Consumer Help Line or by visiting our website
1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us
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 a person whose vehicle is damaged in an accident you cause. 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 $25,000 for each injured person, up to a total of $50,000 per accident, and $25,000 for property damage. The limits will increase on January 1, 2011, to $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.
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.
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.
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 automobile 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.
The type of car you drive. 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 might offer. The amount will vary by company. Following are some of the auto insurance discounts commonly available in Texas:

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
airbags and automatic seatbelts
automatic daytime running lights
antilock brakes
two or more cars on a policy
driver age and annual mileage driven
policy renewal with good claims and driving records
antitheft devises
a concurrent homeowners policy.

Homeowners Insurance

Insurance companies may sell several types of homeowners policies in Texas, each with a different level of coverage:

Named peril policies (also known as specified perils coverage) provide limited protection and covers only those perils specifically named in the policy. A policy that offers named perils coverage will also contain exclusions to perils named in the policy. If you are thinking of purchasing a policy that provides named perils coverage only, it is important make certain that the policy provides coverage for the perils that most concern you.
All risk policies (also known as a comprehensive coverage or open perils coverage) provide broad protection and covers all perils unless they are specifically excluded by the policy. You should always carefully review the excluded causes of loss section of your policy. Even the most comprehensive policy will exclude certain types of loss (damage caused by flood, for example).

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 website

www.opic.state.tx.us

Maintain Adequate Coverage

Buy enough coverage to avoid a major financial loss if your home is severely damaged or destroyed. This means keeping a realistic dollar amount of coverage on your house.

You should also consider insuring your home’s replacement cost, not its market value. The market value may be higher or lower than the cost to rebuild your home.

Replacement Cost vs. Actual Cash Value Coverage

Replacement cost is what you would pay to rebuild or repair your home, based on current construction costs. Replacement cost does not include the value of your land or landscaping features. If you are not sure of the amount it would cost to rebuild your home, your company or agent usually has construction cost tables to help you determine the cost. Construction costs change, so you should update your coverage amounts annually.

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. Read your policy carefully to know whether it offers replacement cost coverage or actual cash value coverage.

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.

Homeowners policies offer limited coverage for valuables like jewelry, furs, cash, and stamp and coin collections. You can buy separate endorsements to increase your 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 belongings should something happen to them. Renters insurance covers stolen, damaged, or destroyed household goods and personal property and also provides liability coverage.

Insurance companies can sell several types of renters policies in Texas. Just like homeowners policies, renters policies provide either all risk and named perils coverage.

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 because of a covered loss. 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 property in which you are living. 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, call TDI's Consumer Help Line or visit the Helpinsure.com website

www.helpinsure.com

Texas FAIR Plan Association

The FAIR Plan provides the standard Texas HO-A homeowners insurance policy form to qualified homeowners. 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, personal injury protection, and uninsured/underinsured motorist 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 eligible 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 a diligent 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 between individuals of the same rate class and essentially the same risk in its rates, policy terms, benefits, or in any other manner 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.state.tx.us

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.

For more information contact: