The thought of purchasing homeowners insurance may be overwhelming to homeowners the first time they go through the process. Most of us really don’t have the slightest idea what to expect when buying insurance, what paperwork is needed or some of the important aspects to cover when ordering insurance. These tips may give you some insight into the process and at least raise some questions to discuss with your new insurance agent. Before we go on, we would like to give special thanks to texasquotes.com for giving the best rates for people seeking Homeowners Insurance in Texas.

The Purpose of Homeowners Insurance

The main purpose of homeowners insurance is to protect against loss (financial risks) for you and the bank. If there is no loan on a home, homeowners insurance is not required. Because most people have such a substantial investment in their home, they normally purchase their own insurance policy to protect their largest asset.

However, if you’re buying a home and intend on paying for it with a loan from a bank, credit union or another source, you’re more than likely required to carry homeowners insurance by the loan company to cover the loss if your home is damaged or destroyed by a natural disaster or other circumstances. This protects the bank’s investment.

Coverage Options

There are several types of coverage options available for purchase, but liability coverage, personal property coverage and the cost of rebuilding are three of the most important to consider.

• Liability coverage covers you for medical payments in the event someone trips on your stairs or falls in your drive for example.

• Personal Property coverage pertains to homeowners insurance on all your personal possessions within the home, tool shed or garage etc. For example, possessions could include clothes, appliances, furniture, stereo equipment and so on.

• Rebuilding costs can be estimated using an online rebuilding calculator. Do not use the market value of a home because it does not represent true building costs. Do not include the cost of the land because it won’t be replaced. Make sure rebuilding costs include the cost for demolishing the last of the structure, debris removal and hauling.

Extra Insurance

It is very important to consider extra insurance coverage based upon the geographical location of the home. For example, if you purchase a home on the coastline in Texas, you more than likely need to ask whether hurricane insurance and flooding coverage are included or need to be purchased as a separate rider in addition to your homeowners insurance policy.

The Application Process

The insurance carrier will require a great deal of personal information including: your birth date, marital status, Social Security number, occupation, history of employment, previous address, credit history, criminal record and your insurance history.

Next, you’ll need to have on hand all the information pertaining to the home you’re insuring such as the value of the house, square footage, age of the house, main building materials used in construction, condition and age of electrical and plumbing systems. You’ll also be asked to supply the distance of the home from the closest fire station and fire hydrants.

Your agent will ask for a list of personal property items to be insured. The best way to handle this request is to create an inventory of all your personal items that need to be insured on your homeowners insurance policy.

The inventory should include a list of the items, purchase price (receipts when possible), condition of the item and the age of each item. It is also extremely beneficial if you photograph or take a video of all the personal property items to be insured.

Use an online insurance website to collect homeowners insurance quotes. Determine which company looks the best, and contact an agent to apply for homeowners insurance Texas statewide.

Understanding the difference between the market value of a house and the replacement value often confuses homeowners when applying for homeowners insurance. Unfortunately, there is a great deal of difference between the two, which can be significantly important if you suffer a loss on your house in a disaster.

What is Market Value?

The market value of a home is what a home would sell for in the current market today. This isn’t necessarily the amount you paid for the home when you purchased it five years ago or even what you think it should be worth today.

However, the important thing to understand is that the market value is not what it would cost you to build an exact copy of your home as it appears today. Therefore, when applying for homeowners insurance, you would never want to buy a homeowners insurance policy (texasquotes.com) based on the market value.

When purchasing a homeowners insurance policy, you want to have enough insurance to cover all the building costs incurred when replacing your home.

What is Replacement Value?

The fact is most of us couldn’t walk out and pay cash for a new replacement home if our home was demolished by an earthquake or hurricane in Texas for example.

However, that’s why we buy homeowners insurance. The intended purpose of insurance is to cover potential losses that homeowners may incur if there should be a devastating loss. Ideally, you want to cover all the costs of rebuilding your home, no more or no less.

When figured correctly, the home replacement value is designed to replace all costs for rebuilding a home when it’s destroyed by a tornado, earthquake, fire or major flood. The cost of home replacement includes the amounts it would cost to repair a home, or rebuild a house with similar materials and the same quality of construction.

80/20 Rule

Insurance companies can vary somewhat in their homeowners insurance policies, however, a great deal of them use an 80/20 rule when discussing replacement values. Texas is in fact, one of the states that requires that you insure your home for at least 80 percent or more of the cost of rebuilding the home.

How the 80/20 Rule Applies

This example illustrates the importance of accurately determining replacement values and maintaining and updating your homeowners insurance policy. Let’s say you are a homeowner with a beautiful coastal home in Texas when a hurricane totally destroys the home.

The owner didn’t bother to calculate re-construction costs for a replacement home, but he used the current market value of his home at $200,000 for insurance.

After the home was destroyed, replacement costs totaled $300,000, which was not equal to 80 percent of projected replacement costs required for homeowners insurance by the insurance company. It was $100,000 short. The insurance company wouldn’t cover the shortage, and the homeowner is on the hook for the remaining $100,000.

If the owner had just insured the house for the cost of rebuilding at $240,000 or more (80% of $300,000), he would have met the 80 percent rule, and the insurance would have covered all rebuilding costs.

Home Replacement Factors

There are many factors taken into consideration when estimating replacement values for homeowners insurance policies.

· Permit costs.

· The purchase of building materials.

· Workers’ compensation coverage for employee laborers.

· The labor charges associated with the removal of trees, debris, demolition services and debris transportation.

· Costs associated with hiring, general contractors, roofers, painters, plumbers, carpenters and electricians.

An experienced insurance agent should be able to help you develop a realistic replacement value for your homeowners insurance coverage.

Homeowners Insurance can be problematic in the great state of Texas. This is because the comical saying that everything is bigger in Texas is actually quite literally true where disasters are concerned. Not surprisingly, even the winter and summer storms prove to be bigger in Texas. Further information on getting a homeowners insurance quote can be obtained from texasquotes.com.

Empirical evidence everywhere supports this assertion. The Weather Channel has given Texas the dubious honor of ranking number one for most disastrous state in the entire United States. Since the year 1953, Texas has suffered through fully eighty-six Presidential disaster declarations. From Galveston on the Coast to the old West Texas town of El Paso, Texans endure floods, tornadoes, regular coastal hurricanes, wildfires, windstorms, and hail. This means that Texas is categorized by homeowners insurance as experiencing all four of the dreaded major weather problems including wind, lightning, fire, and hail. Houston is even ranked among the top five most vulnerable cities to hurricanes in the entire U.S.

What do all of these somewhat frightening statistics mean to you as a homeowner looking for quality, comprehensive, and affordable homeowners insurance Texas statewide? The average homeowners insurance rates in the state of Texas are often volatile and even high. Because of this, Texas residents from San Antonio to Plano should always be thinking about the means to save money on the cost of homeowners insurance.

The good news is that standard homeowners insurance policies do cover many of these dangers. The bad news is that the overwhelming majority of them do not cover flood damage and many policyholders have further chosen to pass on wind coverage to reduce the cost of their premium. Nature is unpredictable if anything, which is why it is not a smart idea to cut down on much needed coverage in order to lower premium costs, however tempting it may be.

You should review your current homeowners insurance policy with a fine-toothed comb to discover what dangers are covered by it and which ones are not covered. The hard truth is that you may need to add to your coverage in order to see your house fully protected from sudden disaster. Should you learn that your home sits in a low-lying area that is prone to floods, you should sincerely think about buying a flood insurance policy through the National Flood Insurance Program. Flood hazard zones are nothing to laugh off.

Standard homeowners insurance actually does cover the buildings’ structures on your property, contents of your house, medical payments, liability for you the homeowner, and loss of use expenses. Many insurance experts will tell you that you should shop around your homeowners insurance coverage once per year to take advantage of any and all discounts that are available to you.

Some of the most common such discounts offered by the major homeowners insurance carriers are worth noting and remembering:

New Home Discount – You can save as much as twenty percent if your Texas home was constructed in the last ten years or less.

Home and Auto Bundle – A discount of as high as twenty percent is available for combining your vehicle and homeowners insurance into one policy with a single provider.

Alarm Systems – Just by protecting your family from intruders, you can receive as much as a ten percent discount. You should note that Houston, Dallas, Fort Worth, and San Antonio all have nationally higher than average break in rates, per the 2012 FBI Report on Offenses Known to Law Enforcement. El Paso, Austin, and Plano conversely have nationally lower than average burglary rates.

Claims Free Discount – If you have not filed any claims for your homeowners insurance in the last ten years, then may receive as much as a twenty percent savings.