Contents
- Welcome to the Real Estate Update.
- Shedding Light on Homeowners Insurance
- It Pays to Do Your Homework
- The Rising Cost of Home Insurance
- Get a CLUE!
- Mold: A Checklist for Homebuyers and Sellers
Welcome to the Real Estate Update
This issue focuses on the recent and dramatic changes in Home Insurance in Texas and offers some tips on dealing with these changes. There's also a piece on the culprit behind these changes: (dare I say the word?) MOLD. These articles are not very entertaining, but they contain good information.
If you are thinking about buying a home, be aware that getting home insurance on your new house may be more difficult than getting the mortgage. Start this process as soon as you find that "perfect house".
If you are thinking of selling, investigate your home's insurability up front. If your buyers can't get home insurance, they won't be able to qualify for a mortgage and they won't be able to proceed with the purchase. [Top]
Shedding Light on Homeowners Insurance
Shopping for homeowners insurance these days can be like stumbling around in the dark, says Judon Fambrough, an attorney with the Real Estate Center at Texas A&M University.
Buying homeowners insurance in Texas used to be simple; 96 percent of homeowners bought the standard HO-B policy, Fambrough says. Consumers could comparison shop based on price and insurers service records.
Now consumers have to compare three components: price, service and the policy forms themselves. A variety of insurance products are being sold to homeowners now that have differing amounts of coverage. The old standard HO-B is not as easily available as it once was, and when it is available, it is often much more expensive.
Last summer the lid blew off the insurance industry. Mold claims reached proportions unacceptable to insurers. Several companies stopped selling comprehensive HO-B homeowners policies to new customers. At least one company refused to write new homeowners policies on homes with a water damage insurance claim in the preceding three years.
In response, the insurance commissioner modified the HO-B policy in November. The modified HO-B limits mold coverage to a sudden and accidental loss from an insured peril. It eliminates coverage for high-priced procedures, such as testing, treating, containing or disposing of mold beyond that necessary to repair or replace property that is physically damaged by water. Policyholders have the option to purchase additional coverage in increments of 25 percent, 50 percent and 100 percent of policy limits for these procedures.
Insurers selling HO-B offer applicants all levels of coverage in addition to the coverage in the basic policy. The modified HO-B requires homeowners to report loss from water damage to their insurer within 30 days from the time it is discovered or should have been discovered if the water leak is hidden or concealed. The state's three largest insurers, State Farm, Allstate and Farmers, were not satisfied with the modified version of the HO-B and sought alternatives.
Allstate got approval to sell a new HO-A Plus policy, which offers more coverage than the bare bones HO-A policy but less than the HO-B policy. The company discontinued its HO-B policy. Allstate's HO-A Plus policy excludes water leaks unless they are sudden and accidental, but it does provide up to $5,000 for mold remediation.
Farmers Insurance received approval to offer a product similar to Allstate's, called the Farmer's HO-A Choice Policy. Farmers no longer writes or renews the HO-B policy.
In February, State Farm Insurance Co., the largest insurer in Texas, began selling the modified HO-B policy to renewing policyholders who had no mold remediation.
In September 2003, State Farm will start selling Texas customers an HO-W policy, which is substantially the same homeowners policy that the company markets in other states. This policy allows customers to opt out of certain types of coverage, such as mold and slow water leaks. State Farm agreed to reduce its rates to reflect coverage differences between its new policy and the Texas standard HO-B homeowners policy it has sold in the past.
Consumers need to know more now when buying homeowners insurance, Fambrough says. They should know the basic difference between HO-A insurance, which covers only the perils listed on the policy, and HO-B, which covers all perils unless they are specifically excluded in the policy. When comparison-shopping, they should be aware they may not be comparing apples to apples. Prices vary and coverage does too.
For more information on Texas homeowners insurance policies, call 800-244-2144 and ask for reprint 1556, Insurance at a Premium. It is $2.50 [Top]
It Pays to Do Your Homework
© 2001 by the Texas Association of REALTORS®. All rights reserved.
The Texas Department of Insurance lists many licensed insurance companies by county, compares premiums and financial soundness ratings, and provides each company's complaint index and contact information.
Check out the company. New insurer in town? Call the Texas Department of Insurance (800-252-3439) to be sure it is licensed. If it is not, your property may not be protected. [Top]
The Rising Cost of Home Insurance
According to the Insurance Information Institute, Texas has the highest home insurance premiums in the nation and rates are rising.
The Five Most Expensive States and Average Premium:| Texas | $879 |
| Louisiana | $692 |
| Florida | $650 |
| District of Columbia | $633 |
| Alaska | $595 |
The Five Least Expensive States and Average Premium:
| Wisconsin | $258 |
| Ohio | $303 |
| Delaware | $312 |
| Idaho | $322 |
| Oregon | $330 |
Comparison shop for premium rates on the Texas Department of Insurance website. The website also offers financial soundness ratings, complaint history, and contact information for each company.
Danna Colca, a State Farm Insurance agent in Grapevine, suggests that you ask your agent about the Texas Home Security Homeowner's Discount. The Texas Department of Insurance endorses premium discounts for residences that meet certain criteria for door and window locks and monitored alarm systems. For details contact your insurance agent. If you qualify it is as easy as calling your local police department for a no-cost inspection. The inspector files a report with the Texas Board of Insurance which issues you the Premium Reduction Certificate your property qualifies for. Give the certificate to your agent to receive the applicable discount. [Top]
Get a CLUE!
A Comprehensive Loss Underwriting Exchange report, that is.
Most home insurers now subscribe to CLUE, a database of homeowners' claims histories.
When a homebuyer applies for home insurance, insurers pull a CLUE report to see whether the buyer or seller have filed claims during the past few years. The report may erroneously include damages that were initially reported to the agent, but then not filed as claims when the homeowner decided to take care of the repairs himself.
The result is that the homebuyer may unable to obtain coverage or find the coverage to be unaffordable. Consequently many homebuyers are requesting to see a CLUE report before making an offer on a home. Only the homeowner can obtain a CLUE report on their property.
If you are thinking of putting your home on the market, you may want to obtain a copy of the CLUE report early on. Then study the report carefully and contact your agent to correct any incorrect information that you find in the report. Even if there is nothing to correct, you will then have the report to share with potential buyers.
To request a CLUE report, call Choicepoint at 866-527-2600. The cost of the report is $8.00. It is also available at no cost if you are ever denied insurance based on information in your report. [Top]
Mold: A Checklist for Homebuyers and Sellers
Mold is a concern for homebuyers and sellers, real estate brokers, inspectors, appraisers, and mortgage lenders. You can learn more about mold at TexasRealEstate.com and from the Texas Department of Insurance Mold Resource Page, www.tdi.state.tx.us/home/mold.html.
Here are a few other items you should keep in mind:
- Real estate agents and brokers are not experts on mold. If you need more information on this subject, you should explore the resources above or contact an expert.
- Insurability may be an issue. Buyers should discuss the insurability of a property with their insurance agent early in the transaction or, in some cases, before an offer is made.
- You may have the property inspected for the presence of mold. The cost for such inspections varies depending on the size of the property, the extent of the mold present, the type of expert conducting the inspection, and other factors.
- Because there are presently no licensing or inspection standards for mold in properties, you may want to discuss mold inspections with more than one expert. Most experts will discuss the limitations of the inspections. For example, an air-sampling test that does not reveal extraordinary levels of toxic mold does not necessarily mean that mold is not present behind walls or under floors where the air samplers were not placed.
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