Auto Insurance - I have compiled some general information related to automobile insurance prepared by the Texas Department of Insurance.  If you have specific questions from a general information persepctive, I recommend you contact them directly.

   COVERAGES
   MEXICO & CANADA COVERAGE
   "HIGH RISK DRIVERS"
   AFTER AN ACCIDENT
   SHOPPING FOR AUTO INSURANCE
   UNDERSTANDING YOUR RATES
   YOUR RIGHTS AS A CONSUMER
   DEFINITIONS

Automobile Insurance Made Easy

(September 2007)

Texas law requires people who drive in Texas to be able to pay for the automobile accidents they cause. Most drivers do this by buying automobile liability insurance. Liability insurance pays to repair or replace the other driver’s car and pays other people’s medical expenses. It does not pay to repair or replace your car or for your injuries. You must have at least the minimum amount of liability coverage required by the state’s financial responsibility law.

The current minimum liability limits are $20,000 for each injured person, up to a total of $40,000 per accident, and $15,000 for property damage per accident. This basic coverage is called “20/40/15” coverage. The minimum limits will increase on April 1, 2008, to $25,000 for each injured person, up to a total of $50,000 per accident, and $25,000 for property damage.

Because of car prices and the high cost of medical care, the minimum amounts might not be enough if you cause an accident. If your liability limits are too low to pay for all of the other driver’s costs, the driver may sue you to collect the difference. To protect yourself financially, consider buying more than the basic limits.

Proof of Financial Responsibility

When you buy an auto policy, your insurance company will send you a proof-of-insurance card. You will need to show proof of insurance when you

• are asked for it by a law enforcement officer
• have an accident
• register your car or renew its registration
• obtain or renew your driver’s license
• get your car inspected.

There are severe penalties for violating the state’s financial responsibility laws. A first conviction will result in a fine between $175 and $350. Subsequent convictions could result in fines of $350 to $1,000, suspension of your driver’s license, and impoundment of your automobile.

Know Your Rights

Texas has a Consumer Bill of Rights for auto insurance. Your insurance company must send you a copy with your policy. Read it to understand your rights under Texas law.

Auto Insurance Coverages

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 eight types of coverages. Companies may sell alternative policies if the Texas Department of Insurance (TDI) approves them in advance. Read your policy carefully, as coverages can vary by policy and company. Pay special attention to the exclusions section, which lists the things your policy doesn’t cover. The front page of your policy is called the declarations, or “dec,” page. It shows the exact name of your insurance company, your policy number, and the amount of each of your coverages and deductibles.

The following summarizes the eight coverages in the Texas Personal Automobile Policy. Although your coverages and policy terms may differ from these, this summary can help you understand various auto insurance coverages and the way they work.

1. Liability Coverage (Basic liability coverage meets the state’s financial responsibility requirement.)

   Pays: Other people’s expenses for accidents caused by drivers covered by your policy, up to your policy’s dollar limits. These may include the other person’s

   • medical and funeral costs, lost wages, and compensation for pain and suffering
   • car repair or replacement costs
   • auto rental while the other driver’s car is being repaired
   • punitive damages awarded by a court.

   Liability insurance also pays your attorney fees if someone sues you because of the accident and bail up to $250 if you are arrested.

   Covers: You and your family members. Other people driving your car with your permission might be covered. You and your family members might be covered when driving someone else’s automobile – including a rental car – but not a car that you don’t own but have regular access to, such as a company car. Family members attending school away from home might be covered, as well as a spouse living elsewhere during a marital separation.

   Note: Some policies won’t cover other people, including family members, unless they’re specifically named in the policy. Your policy’s dec page should list the names of all of the people covered by the policy.

   Who qualifies as a family member?

   Generally, a “family member” is anyone living in your home related to you by blood, marriage, or adoption, including your spouse, children, in-laws, adopted children, wards, and foster children.

2. Medical Payments Coverage

   Pays: Medical and funeral bills resulting from accidents, including those in which the other person is a pedestrian or bicyclist.

   Covers: You, your family members, and passengers in your car, regardless of who caused the accident.

3. Personal Injury Protection (PIP) Coverage

   Pays: Same as medical payments coverage, plus 80 percent of lost income and the cost of hiring a caregiver for an injured person.

   Covers: You, your family members, and passengers in your car, regardless of who caused the accident.

   An insurance company must offer you $2,500 in PIP, but you can buy more. If you don’t want PIP, you must reject it in writing.

4. Uninsured/Underinsured Motorist (UM/UIM) Coverage

   Pays: Your expenses from an accident caused by an uninsured motorist or a motorist who did not have enough insurance to cover your bills, up to your policy’s dollar limits. Also pays for accidents caused by a hit-and-run driver if you reported the accident promptly to police.

   • Bodily injury UM/UIM pays without deductibles for medical bills, lost wages, pain and suffering, disfigurement, and permanent or partial disability.
   • Property damage UM/UIM pays for auto repairs, a rental car, and damage to items in your car. There is an automatic $250 deductible. This means you must pay the first $250 of the repairs yourself.

   Covers: You, your family members, passengers in your car, and others driving your car with your permission.

   Insurers must offer UM/UIM coverage. If you don’t want it, you must reject it in writing.

5. Collision (Damage to Your Car) Coverage

   Pays: The cost of repairing or replacing your car after an accident. Payment is limited to your car’s actual cash value, minus your deductible. Actual cash value is the market value of a car like yours without damages.

6. Comprehensive (Physical Damage Other than Collision) Coverage

   Pays: The cost of replacing or repairing your car if it is stolen or damaged by fire, vandalism, hail, or a cause other than collision. Comprehensive coverage also pays for a rental car or other temporary transportation if your car is stolen. Your policy won’t pay for an auto theft unless you report it to police. Payment is limited to your car’s actual cash value, minus your deductible.

   If you still owe money on your car, your lender will require you to have collision and comprehensive coverage.

7. Towing and Labor Coverage

   Pays: Towing charges when your car can’t be driven. Also pays labor charges, such as changing a tire, at the location where your car became immobile.

8. Rental Reimbursement Coverage

   Pays: A set daily amount for a rental car if your car is stolen or is being repaired because of damage covered by your policy.

Coverage for Stereo Equipment

Your policy won’t pay for CDs, tapes, cell phones, citizen band radios, or stereo equipment not permanently installed in your car. However, you can buy endorsements to your policy that provide separate coverage for these items for an additional premium.

Coverage of New or Additional Automobiles

If you buy another car, your policy might automatically cover it with certain limitations. Read your policy to know whether it automatically covers an additional or replacement car.

• In general, an additional car usually has the same coverage as the car on your policy with the broadest coverage. For example, if you have two cars – one with liability coverage only and one with liability, collision, and comprehensive coverages – and you buy a third car, the third car will automatically have liability, collision, and comprehensive coverage.
• A replacement car usually has the same coverage as the car it replaced. For example, if you trade in an older car that only had liability coverage, the new car will automatically have only liability coverage.

Be sure to tell your insurance company as soon as possible that you have added or replaced a car and which coverages you want. You could lose coverage on an additional or replacement car if you wait longer than the number of days specified in your policy to notify your insurance company.

Coverage for Rental Cars

Auto rental agencies offer collision damage waivers and liability policies. The collision damage waiver is not insurance. It is an agreement that the rental company will waive its right, with certain exceptions, to recover from the renter the cost of damage to the car.

If you have auto insurance, your policy may already cover damage to a rental car. Your coverage limit, however, might be less than the value of a rental car. Read your policy to know what’s covered and the coverage limits. If your coverage limit is too low, consider increasing it. You will pay more in premium, but it might be cheaper than buying additional coverage through the rental agency, especially if you rent cars often. The Texas Automobile Rental Liability Policy provides liability insurance for renters who do not have a personal auto policy.

If you don’t own a car, but borrow or rent cars often, you can buy a non-owner liability policy. A non-owner policy pays for damages and injuries you cause when driving a borrowed or rented car, but it does not pay for your injuries or damage to the car you were driving.

Driving in Other States, Canada, and Mexico

A Texas automobile insurance policy usually meets the financial responsibility requirements of other U.S. states and Canada. Mexico, however, does not recognize U.S. auto liability policies.

Mexico does not require drivers to have automobile liability insurance. Mexican authorities can hold drivers criminally and financially responsible for any auto accidents they cause. If you’re in an accident that results in an injury, police may detain you until they determine who is at fault. You will have to show that you either have insurance recognized by the Mexican government or the financial ability to pay any judgment against you.

Some U.S. companies provide a free endorsement extending your policy’s coverage to infrequent trips of up to 10 days and as far as 25 miles into Mexico. You can buy coverage for longer stays, but it is usually valid only within 25 miles of the border. In addition, these endorsements might not meet Mexican legal requirements. You can buy Mexican liability insurance from Texas agents who specialize in it. Check your phone book for listings of insurance agents who specialize in auto insurance for travel in Mexico. Your local agent also might be able to help you find coverage with a Texas-licensed Mexican company.

You may be able to buy a Mexico “tourist” endorsement for your U.S. policy. This endorsement extends your liability coverage to pay costs exceeding a Mexican liability policy’s limits. It covers trips of any distance and any length of time. Ask your agent which endorsements your insurance company offers.

Auto Insurance for Young Drivers

Young drivers must comply with the state’s financial responsibility laws. Parents can usually add their children to their auto policy to satisfy the financial responsibility requirements. Adding a young driver to a parents’ policy can be expensive, but it’s cheaper than buying a separate auto policy.

Some policies require all drivers to be named on the policy for coverage to apply. Therefore, it’s important that you list all family members on the policy as soon as they reach driving age. If you don’t have all of the drivers in your family listed on your policy and the company learns about them later – because of an accident claim, for instance – the company will bill you for the extra premium you should have paid and could deny your claim and coverage.

If you have children attending school away from home, tell your insurance company. Because companies base rates on where a car is usually located, it might need to adjust your premium. If the school is in another state, check on the financial responsibility laws in that state to make sure you have the appropriate coverages.

Generally, if a teenager is the principal driver of a particular automobile, the company will base the teen’s rate on that car. Otherwise, the company will assign the teenage driver to the car (usually the most expensive) in your household that produces the highest rate.

Removing Your Children from Your Policy

You may want to remove your children from your policy when they no longer live with you. You’ll probably have to prove to the insurance company that your child has moved. You can use documents like a driver’s license, lease agreement, or utility receipts to show that your child has a separate address.

It’s probably not a good idea to remove children from your policy if they are attending school away from home. It’s risky to drop coverage if your teenager might occasionally drive at school or when home on visits. Many insurance companies will require you to keep students on your policy, even if you would like to remove them.

You can sometimes remove a teenage driver from your policy by buying a non-owner policy. This usually isn’t a good idea, however. A non-owner policy only provides liability coverage for someone driving a vehicle that he or she doesn’t own. If your teenager has an accident while driving your car, neither your policy nor the non-owner policy will pay to repair or replace your car. The rates for a non-owner policy will likely cost more than leaving the teen on your policy.

Saving Money on Insurance for Young Drivers

Some insurance companies give a discount for teenagers who complete a Department of Public Safety (DPS)-approved driver education course. Drivers taught by their parents may also be eligible for the discount if the parent used a DPS-approved course. Some companies offer discounts to young drivers who make good grades in school or who belong to certain youth groups. Ask your agent about discounts.

Auto Insurance for ‘High Risk’ Drivers

Insurance companies often check motor vehicle records for your driving history and credit reports for your financial history before writing or renewing your policy. Owning a car built for speed also can label you as high risk.

Many companies use the Comprehensive Loss Underwriting Exchange (CLUE) to learn an applicant’s insurance claims history. If the company based its decision to deny, cancel, or nonrenew you even partly on a CLUE report, you can get a free copy by calling the ChoicePoint Consumer Center or by visiting the ChoicePoint website

1-800-456-6004

Before calling, get the CLUE reference number from the insurance company. Using the reference number will speed the process and ensure that you request the right report.

Insurance Options for High-Risk Drivers

• If you’re having trouble finding insurance because you have tickets, accidents, or poor credit, keep shopping. Each company has its own guidelines for deciding whether to insure people. Several major insurer groups write coverage for high-risk drivers through one of their member companies.
• If you can’t find a company willing to sell you a policy, you may be able to get basic liability coverage through the Texas Automobile Insurance Plan Association (TAIPA). You qualify for TAIPA coverage only if two insurance companies reject you.

TAIPA only provides the basic liability insurance required by Texas law. It doesn’t provide collision or comprehensive coverage or higher liability limits than the law requires. You can add personal injury protection (the minimum limit is $2,500) and uninsured/underinsured motorist coverage.

TAIPA coverage costs more than most companies charge. TAIPA policyholders pay additional premiums, called surcharges, for traffic convictions. They also pay higher surcharges than other drivers pay for accidents. TDI rules encourage insurance companies to take policyholders out of TAIPA and insure them at lower rates after a year without tickets or accidents. The rules also require companies to offer cheaper “voluntary” policies to their TAIPA policyholders who have gone three years without tickets or accidents.

To get TAIPA coverage, apply with a licensed insurance agent. Only agents specifically certified by TAIPA may sell TAIPA policies. An agent who quotes you a premium higher than TAIPA’s must tell you about TAIPA if you were previously uninsured and had no more than one accident and one ticket in the previous three years. For more information, call TAIPA

1-800-580-TAIP (8247)
444-4441 in Austin

After an Accident ... What Now?

• Move your car, if possible, to avoid blocking traffic and to protect it from further damage.
• Call the police if somebody is injured or killed, if you can’t move your car, or if the accident involved a hit-and-run driver. Your uninsured motorist coverage pays for a hit-and-run accident only if you report it to police.
• Get the other driver’s name, address, telephone number, license plate number, driver’s license number, and insurance information. Give the other driver the same information about you.
• Write down the insurance company name and the policy number exactly as shown on the other driver’s proof-of-insurance card. Insurance companies often have similar names, so make sure you get the correct company name.
• Get the names, addresses, and telephone numbers of any witnesses to the accident.
• Notify your insurance company as soon as possible. Your company probably has a 1-800 number to report claims. If not, call your agent. The agent or company will advise you about seeing an adjuster and getting repair estimates. Also, give your agent or company the names and addresses of any witnesses and anyone injured.
• If you reported your claim by phone, follow up in writing as soon as possible to protect your rights under Texas’ prompt payment of claims laws.
• Send the company copies of the accident report and any legal papers you receive about the accident.
• Cooperate with the company’s investigation. You might have to submit a proof-of-loss form or have a medical examination.

If the other driver refuses to tell you the name of his or her insurance company, get a copy of the police accident report. The accident report should list the other driver’s name and insurance company. If the police did not investigate the accident, you can report the driver’s refusal to police. This could result in a report identifying the driver’s insurance company. In addition, the Texas Department of Public Safety keeps files of forms – called SR-22s – that show the insurance companies of people convicted of DWI or driving without insurance. Call the DPS Customer Service Bureau

512-424-2600

Accidents Caused by Other Drivers

If you were in an accident caused by another driver, the other driver’s insurance company should pay the following costs, up to the policy’s limits:

 

• repair or replacement of your car
• car rental while your automobile is being repaired
• your medical and hospital bills
• wages lost because of an injury
• compensation for pain and suffering if anyone is hurt.

If the other driver’s insurance won’t cover all your medical bills, file a claim for the difference against your Personal Injury Protection (PIP) coverage, if you have it. For amounts over that, you can claim against your uninsured/underinsured motorists (UM/UIM) coverage or your health insurance policy.

If the other driver’s policy won’t cover all of your auto repairs, file a claim against your collision or UM/UIM coverage for the difference (minus your deductible) between the damage to your car and what the other driver’s policy will pay.

The other driver’s insurance company may ask you to sign a release to settle your claim and forgo future claims related to the accident. Don’t sign a release until you are satisfied with the total settlement. Get a letter from your doctor estimating the cost and length of your future medical treatment. You might want to consult an attorney before accepting a settlement. Under Texas law, you have two years after an accident to either settle your claim or file a lawsuit.

Texas law prohibits insurance companies from delaying payment of a claim in order to pressure you to sign a release. If you believe an insurance company is delaying payment to pressure you, file a complaint with TDI.

If the other driver denies fault, his or her insurance company may refuse to pay the claim. Independent witnesses could make a difference in getting the company to pay. It’s important to get names, addresses, and telephone numbers of any witnesses to the accident. Make sure the insurance company knows about the witnesses. If the company continues to refuse to pay the claim, you can file a claim against your own insurance or you may have to go to court to resolve the issue.

Before filing a claim with your company, ask your agent or your company’s underwriting department how a claim might affect your rates on renewal. A company cannot refuse to renew your policy solely because you had one accident in a 12-month period that was not your fault. However, if the accident affected your DPS driving record, your company may consider it in determining your rates, whether you made a claim on the accident or not.

Getting Your Car Repaired

Your insurance company will either have an adjuster inspect your car and calculate an estimate for repairs or ask that you provide repair estimates from mechanics and auto body shops. Some companies may give you a list of “preferred” shops, but they cannot require you to use a particular repair shop. On collision and comprehensive claims, your company is obligated to pay only for parts of “like kind and quality” to those that were damaged. Insurance companies will pay for repairs or replacement only up to the car’s actual cash value. Actual cash value is the amount your car would be worth if it weren’t damaged.

If the repair estimates are more than your car is worth, the insurance company will likely “total” your car and pay you its actual cash value rather than pay to fix it. Insurance companies typically use the National Automobile Dealers Association’s Used Car Guide to determine the value of your car. The company’s offer might not recognize your car’s condition, special features, or value on the local market. Be prepared to negotiate with the company to get what you believe is a fair deal. A company might raise its offer if you can show that your car would sell for a higher price in your area. Get written price quotes for a similar automobile from several used car dealers, or look in the classified section of your local newspaper for used car prices.

Sometimes the insurance company may want to total your car, but you’d prefer to have it repaired instead. You can keep your car if you are willing to subtract its salvage value from the insurance settlement. Make sure the cost to repair the car will not exceed the car’s actual cash value. To find out the salvage value, contact local salvage yards for estimates.

If you and your insurance company can’t agree on the amount of your settlement, you can demand an appraisal. Appraisal allows you and the company to hire separate damage appraisers. The two appraisers choose a third appraiser to act as an “umpire.” The appraisers review your claim, and the umpire rules on any disagreements. The appraisal decision is binding as to the amount of the loss. If there is a dispute about what is covered, you can pursue a settlement of the coverage issue after the appraisal. You must pay for your appraiser and half of the umpire’s costs.

Appraisal is available only in disputes between you and your insurance company. It is not available if the other driver was at fault and you disagree with his or her company’s offer.

Getting a Rental Car

If you have more than basic liability coverage or another driver caused your accident, you should be able to get a rental car while yours is in the shop.

• If the other driver was to blame, his or her liability insurance will pay for a rental car.
• If the accident was a hit-and-run or the other driver was uninsured and at fault, your UM/UIM property damage coverage will pay for a rental car.
• If your car was stolen and you have comprehensive insurance, your company will provide a set amount each day, up to your policy’s limit, for a rental car.
• If your car is being fixed or replaced for some other reason, your insurance company won’t provide a rental car unless you have rental reimbursement coverage.

Filing a Claim

Once you have filed a claim, Texas law sets deadlines for the insurance company to act.

• The company must respond within 15 days after receiving your claim in writing. It will probably ask you to document your loss.
• After you submit any requested documentation, the company has 15 business days to accept or reject your claim.
• Once the company agrees to pay your claim, it must send your check or draft within five business days.

A company that cannot meet these deadlines must send you a notice explaining why. The company then has 45 days to either approve or reject your claim.

Note: The prompt payment law does not apply if another driver’s insurance company is paying the claim. However, the company is required to act in good faith and to make a prompt and fair settlement.

If the insurance company rejects your claim, it must explain the rejection in writing. If the company contends that your policy doesn’t cover the loss, ask to see the policy language that supports denial of your claim. A court usually will order the company to pay if the language is unclear and the policy could reasonably be read your way.

Getting Help

If you have a problem with your insurance company, first try to resolve the problem yourself. Often disputes are the result of miscommunication. Talk to your agent or a company representative. Texas law requires most companies to have toll-free telephone lines for their policyholders.

If you are unable to resolve the dispute, you can file a complaint with TDI. TDI will notify the company of your complaint, ask for a detailed response, and send you a copy of the company’s response. The insurance specialist assigned to your complaint will send you an explanation of the outcome, usually within 40 days after receiving your complaint.

TDI has limited jurisdiction in some complaints. For instance, we can’t resolve questions of fact or determine liability (who is at fault in an accident). These issues generally must be resolved in court. However, even when our jurisdiction is limited, our involvement may encourage the company to review your issue more thoroughly. In addition, your complaints and inquiries help TDI assist other Texans by identifying potential problems with insurance companies and agents.

Shopping for Auto Insurance

Rates vary widely among companies, so it pays to shop around. Following are some tips to help you find the best deal for your money:

• Decide before shopping what coverages you need.
• Consider choosing a higher deductible. Your deductible is the amount you must pay before the insurance company will pay. Higher deductibles will lower your premium, but you’ll have to pay more out of your own pocket if you have a claim.
• Get price quotes from several companies. Make sure the quotes are for the same coverages.
• When getting a price quote or applying for insurance, answer questions truthfully. Wrong information could result in an incorrect price quote or could lead to a denial or cancellation of coverage.
• Ask your agent whether you qualify for any discounts the company might offer.
• Consider factors other than price, including a company’s financial rating, complaint index, and license status. The financial rating indicates a company’s financial strength and stability, and the complaint index is an indication of its customer service. Buy only from licensed companies and agents. It is against the law to sell insurance without a license in Texas.

You can learn more about a company, including its license status, complaint history, and financial rating from an independent rating organization, by calling TDI’s Consumer Help Line or by visiting our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

Insurance on the Installment Plan

Auto insurers in Texas must offer installment plans. Some companies only offer payment plans through premium finance companies, which often charge high interest rates.

You should seek not only low rates but also low-cost financing. Ask who will provide your installment plan. Look for insurance companies that offer their own installment plans. Ask about the down payment, the number of installments, interest or service charges, and the amount of your total monthly payment.

Insurers and premium finance companies must give you terms at least as favorable as these:

• For a 12-month policy, a 16.67 percent down payment and 10 equal monthly installments. If the policy is through the Texas Automobile Insurance Plan Association (TAIPA), the down payment is 20 percent.
• For a six-month policy, 33.33 percent down, with four equal monthly payments.

 

Premium Finance Companies

Premium finance companies loan people money to pay their insurance premiums. Sometimes the only installment plan offered is through a premium finance company, which the agent selling your policy might own.

The insurance agent must tell you if your installment plan is with a premium finance company and must give you the premium finance company’s name.

Note: If you buy insurance through TAIPA, an agent who offers a premium finance company loan must give you a disclosure form comparing it with TAIPA’s installment plan. The form will show a side-by-side comparison of the premium finance company’s payment plan and the TAIPA plan. The form will show fees, interest payments, and the amount you will pay for each plan. If you choose the premium finance company, you must sign the form as proof you made your choice after seeing the comparison.

If you enter into a premium finance agreement with a premium finance company, you will pay the down payment to your agent or company. Be sure to get a receipt at the time of payment. The premium finance company pays the balance of your premium directly to the insurance company and then collects the amount financed, plus interest, from you in installments.

Your loan agreement assigns your power of attorney to the premium finance company for payments involving your policy. The premium finance company can cancel your policy if you fall behind in your payments.

If the insurance company cancels your policy for any reason, the premium refund goes to the premium finance company, which uses it to pay off your loan. The premium finance company will refund any remaining money to you. The finance company must send your refund to you within 20 days after receiving it from the insurance company.

A premium finance company must have a license from TDI. You can verify licenses by calling TDI’s Consumer Help Line.

When dealing with a premium finance company, here are some things you should do to protect yourself:

• Make sure the agent shows you the cost of your insurance policy and the cost of financing your payment plan separately so you can see exactly what you’re paying for. Don’t enter into a premium finance agreement unless you understand the charges and how the plan works.
• Compare the premium finance company’s charges to installment plans offered by insurance companies and to bank or credit card interest rates. It could be cheaper to pay for your policy with a credit card if the credit card has a lower interest rate than the premium finance company.
• If you enter into a premium finance agreement, make sure the agreement correctly identifies the financed policy. The agreement should show the policy or binder number, effective date of the policy, and the premium amount.
• Be sure you complete all the paperwork and sign and date the agreement before you leave the agent’s office.
• Get a copy of the installment agreement. Federal truth-in-lending laws require the lender to give you a copy.
• Make your installment payments only by check or money order payable to the company named on your premium finance notice. If you pay cash, demand a receipt.
• If you or the insurance company cancels your policy, make sure the premium finance company pays any refund it owes you.

Understanding Rates

Texas law requires insurance rates to be reasonable, adequate, not excessive to the risks for which they apply, and not discriminatory. Auto insurance companies in Texas set their own rates and file them with TDI for review. Companies do not have to receive prior approval before using their rates, but if TDI determines that a company’s filed rates are excessive, it can order the company to make refunds.

Factors that Affect Your Premium

Companies may use a number of criteria to establish your premium. These include:

• 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 are higher for cars driven to and from work or used for business than for cars driven solely for pleasure.
• 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.
• 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. However, a company cannot otherwise charge you more for liability coverage because of your prior lack of coverage.

Companies must file their underwriting guidelines with TDI and update them each time they make a change.

Discounts and Surcharges

Discounts can help you save money on your premium. Discounts vary by company. Following is a list of some of the discounts commonly available in Texas:

• defensive driving and driver education courses for young drivers
• students with good grades
• 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.

If you have a poor driving record, you can expect to pay more for your insurance. Companies may add surcharges to your premium – some as high as 60 percent – for the following:

• accidents (the more accidents, the higher the surcharge)
• moving violations (speeding, etc.)
• involuntary manslaughter
• driving under the influence
• criminally negligent driving
• driving without a license or with a suspended license.

 

Losing Your Insurance

Companies may cancel or nonrenew a policy for a variety of reasons. Cancellation means the company terminates your policy before its expiration date. Nonrenewal means the company refuses to renew your policy when it expires.

A company must explain in writing its reasons for declining, canceling, or not renewing your policy. This explanation must include the incident or risk factor that violated the company’s underwriting guidelines and the insurer’s sources of information.

• An insurance company may not cancel an auto policy that has been in effect for more than 60 days unless
• you fail to pay your premium
• you file a fraudulent claim
• your driver’s license or motor vehicle tags are suspended or revoked (this also applies to other drivers who live with you or use your car).

During the first 60 days, a company may cancel a policy for any lawful reason, including a ticket or an accident. If the company cancels your policy because of an accident, it still must pay for covered damages resulting from the accident. The company must send you a written notice at least 10 days before canceling your policy.

If either you or the company cancels your policy, the company must refund any “unearned premium” to you. Unearned premium is the amount you paid in advance that did not actually buy coverage. For example, if you paid a six-month premium of $600 and you cancel your policy after one month, the company owes you $500 in unearned premium, minus any applicable agent or policy fees.

A company cannot refuse to renew your policy unless it has been in effect for at least 12 months. This means a company must renew a six-month policy to give you a full 12 months of coverage. The company must give you 30 days’ notice before not renewing your policy.

In Texas, a company cannot refuse to renew your policy because of

• weather-related claims, including damage from hail, floods, tornadoes, high winds, and hurricanes
• damage from colliding with animals or birds
• damage from gravel and other flying and falling objects (the company can raise your deductible if you have three such claims in 36 months)
• towing and labor claims (the company can refuse to renew your towing and labor coverage if you have four such claims in 36 months)
• other claims or accidents that cannot reasonably be blamed on you, unless you have more than one of these claims in a 12-month period.

Sometimes an insurer will move you to another company in its company group. If a company moves you to another company, it must give you 30 days’ notice that it will not renew your original policy. If the company fails to give you 30 days’ notice, TDI can require the company to renew your policy for another year in your original company.

If you get a nonrenewal or cancellation notice, start shopping for new insurance immediately. Make sure you keep your liability coverage uninterrupted to satisfy Texas’ financial responsibility laws. If you still owe money on your car, your lender will usually require you to maintain collision and comprehensive coverages without interruption. If you cancel or lose these coverages, your lender will buy single-interest automobile physical damage coverage and add the cost to your loan payment. This coverage is expensive and protects only the lender.

Your Rights against Unfair Discrimination

An insurance company cannot deny, refuse to renew, limit, or charge more for coverage because of your race, color, religion, or national origin.

A company also cannot 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 would have to show valid evidence that you present a greater risk for a loss than other people it is willing to insure. A company cannot nonrenew your policy because someone in your family has reached driving age.

In addition, a company cannot discriminate between individuals of the same rate or risk class in its rates, policy terms, benefits, or in any other manner unless the refusal, limitation, or higher rate is “based on sound actuarial principles.”

You may sue insurance companies for unfair discrimination, including denial of insurance. You must file the suit in a Travis County district court. However, if the court finds the suit groundless, in bad faith, or brought for the purpose of harassment, the court could order you to pay the insurance company’s legal expenses.

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

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.

DEFINITIONS:
Actual Cash Value (ACV) - The value of your property, based on the current cost to replace it minus depreciation.
Adjuster - A person who investigates and settles insurance claims.
Agent - A person who sells insurance policies.
Application - A form you fill out with information about you that an insurance company will use to decide whether to issue you a policy and how much to charge.
Benchmark Rate(s) -The rates set annually by the Commissioner of Insurance that rate-regulated insurance companies use to reference their rates. Rate-regulated insurance companies filing rates within a range of 30 percent above or below the benchmarks may use them immediately upon filing without prior approval. A company that wants to set its rates outside this range must receive the Commissioner´s prior approval.
Binder - A temporary insurance contract that provides proof of coverage until you receive a permanent policy.
Bodily Injury (BI) - Physical injury to a person.
Cancellation - Termination of an insurance policy by the company or insured before the renewal date.
Claimant - A person who makes an insurance claim.
Collision Coverage - Pays for damage to your car without regard to who caused an accident. The company must pay for the repair or 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 automobile from causes other than accidents. These include hail, vandalism, flood, fire, and theft.
Contract - In most cases, the term "contract" refers to an insurance policy. A policy is considered to be a contract between the insurance company and the policyholder.
Declarations Page - The page in your policy that shows the name and address of the insurer, the period of time a policy is in force, a description of the vehicle, the amount of the premium, and the amount of coverage.
Deductible - The amount the insured must pay in a loss before any payment is due from the company.
Depreciation - The act of lowering an item´s value due to use or wear and tear.
Earned Premium - The portion of a policy premium that has been used to actually buy coverage, or that the insurance company has "earned." For instance, if you have a six-month policy that you paid for in advance, two months into the policy, there would be two months of earned premium. The remaining four months of premium is called unearned premium.
Endorsement - A written agreement attached to a policy expanding or limiting the benefits otherwise payable under the policy. Same as a "rider."
Gap Insurance - Insurance that pays the difference between the actual cash value of a vehicle and the amount still to be paid on the loan, Some gap policies may also cover the amount of the deductible.
Lapse - Termination of a policy due to non-payment of premiums.
Liability Insurance - Pays for injuries to the other party and damages to the other vehicle resulting from an accident you caused. It also pays if the accident was caused by someone covered by your policy, including a driver operating your car with your permission.
Liability Limits - The maximum amount your liability policy will pay. Your policy must pay at least $20,000 per person for injuries and deaths, up to $40,000 for all victims of an accident, plus $15,000 for property damage. You can purchase higher liability limits for additional premium.
Loss - The amount an insurance company pays on a claim.
Medical Payments & Personal Injury Protection (PIP) - Both pay limited medical and funeral expenses if you, a family member, or a passenger in your car is injured or killed in a motor vehicle accident. PIP also pays lost-income benefits.
Named Driver Exclusion - An endorsement that provides that a policy does not cover accidents when a specifically named person is the driver.
Named Driver Policy - A policy that covers only the drivers specifically named in the policy. Generally, all other drivers are excluded from coverage under the policy. This type of policy is usually written by surplus lines companies.
Non-Owners Policy - Insurance coverage that offers liability, uninsured motorist, and medical payments to a named insured who does not own a vehicle.
Non-renewal - A decision by an insurance company not to renew a policy.
Policy Period - The period a policy is in force, from the beginning or effective date to the expiration date.
Premium - The amount paid by an insured to an insurance company to obtain or maintain an insurance policy.
Property Damage (PD) - Physical damage to property.
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.
Rider - A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Same as an "endorsement."
Surcharge - An extra charge added to your premium by an insurance company. For automobile insurance, a surcharge is usually added if you have at-fault accidents.
Surplus Lines - Coverage from out-of-state companies not licensed in Texas but legally eligible to sell insurance on a "surplus lines" basis. Surplus lines companies generally charge more than licensed companies and often offer less coverage.
Towing & Labor Coverage - Pays for towing charges when your car can´t be driven. Also pays labor charges, such as changing a flat tire, at the place where your car broke down.
Underwriter - The person who reviews an application for insurance and decides if the applicant is acceptable and at what premium rate.
Underwriting - The process an insurance company uses to decide whether to accept or reject an application for a policy.
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. It will also pay when your medical and car repair bills are higher than the other driver´s liability coverage.

HOMEOWNERS INSURANCE

Topics:
   Introduction To Homeowners Insurance
   Types of Policies
   What Homeowner's Covers/Does Not Cover
   Maintaining Adequate Coverage
   Other Types Of Coverage (Renters, Condo Owners)
   Shopping for Homeowner's Insurance
   Having Trouble Insurance Your Home?
   Losing Your Insurance
   If You Have To File A Claim

Homeowners Insurance

(July 2007)

Homeowners insurance protects you from financial losses caused by storms, fire, theft, and other events outlined in your policy. It is important to know what’s in your policy. Make sure you read your policy carefully and understand your specific coverages.

It’s also important to know your rights. Texas has a Consumer Bill of Rights for homeowners and renters insurance. Your company must send the Bill of Rights with your policy or renewal. Don’t wait until you have a claim to review your policy and to know your rights.

Texas Homeowners Policies

You can buy a dwelling policy that covers only the structure of your house. However, most homeowners buy policies that combine five different coverages in a single policy:

Dwelling - pays for damage or destruction to your house and any unattached structures and buildings, such as fences, detached garages, and storage sheds.

Personal property - pays for theft, damage, or destruction of the contents of your house, including furniture, clothing, and appliances

Liability - protects you against financial loss if you are sued and found legally responsible for someone else’s injury or property damage. A homeowners policy automatically provides $25,000 in coverage. You can buy up to $1 million in coverage for an extra premium.

Medical payments - pays medical bills for people hurt on your property. It also pays for some injuries that happen away from your home, such as your dog biting someone. A basic homeowners policy pays $500 in medical bills. You can pay extra and get up to $5,000 in medical payments coverage.

Loss of use - pays additional living expenses if your home is too damaged to live in during repairs. Most policies pay 10 to 20 percent of the amount of your dwelling coverage.

Types of Policies

Insurance companies may sell several types of policies in Texas, each with a different level of coverage. Three of the policy forms available for sale in Texas – the HO-A, HO-B, and HO-C – are standardized. This means the policy language and coverages provided by these policies are the same, regardless of the company writing the policy. Although an HO-B policy written by one company will be exactly the same as an HO-B policy written by another company, the two companies may charge different rates.

Companies may offer alternative policy forms, if approved in advance by the Commissioner of Insurance. These policies are not standardized and usually provide varying coverages. Read your policy carefully to know exactly what coverages are included.

Some companies may sell more than one policy form but may offer only one form to customers. 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 add additional coverage by buying endorsements to your base policy.
Following is a brief description of the types of policies sold in Texas:

• HO-A policies provide extremely limited actual cash value coverage of your home and its contents. Only the types of damage specifically listed in the policy are covered. The HO-A is a standardized Texas policy.
• HO-A amended policies provide more extensive coverage than the base HO-A policy but less coverage than an HO-B. HO-A amended policies are not standardized. Coverage provided by these policies may differ by company.
• HO-B policies provide replacement cost coverage for most types of damage, except those specifically excluded in the policy. The HO-B is a standardized Texas policy.
• HO-C policies provide the most extensive coverage, but they are more expensive than other types of policies. The HO-C is a standardized Texas policy.

Approved alternative policies offer varying levels of coverage. Companies can sell alternative policies only if the policy form is approved in advance by the Commissioner of Insurance. These policies are not standardized. Coverage may differ considerably from one company to another and from the coverage provided in the standardized Texas homeowners policies.

Generally, HO-B policies provide the most coverage for the price, but some companies do not offer the HO-B policy. For a side-by-side comparison of the coverages provided by the policy forms approved for sale in Texas, visit the website of the Office of Public Insurance Counsel (OPIC)

What Homeowners Policies Do and Don’t Cover

 

Most Policies Cover Losses Caused by	Most Policies Do Not Cover Losses Caused by
Fire and lightning	Flooding
Aircraft and vehicles	Earthquakes
Vandalism and malicious mischief	Termites
Theft	Insects, rats, or mice
Explosion	Freezing pipes while your house is unoccupied (unless you turned off the water or heated the building)
Riot and civil commotion	Wind or hail damage to trees and shrubs
Smoke	Losses if your house is vacant for 60 days or more
Windstorm, hurricane, and hail	Wear and tear or maintenance
Sudden and accidental water damage	Water damage resulting from continuous and repeated seepage

Companies may exclude coverage for certain losses. For example, if you live on the Gulf Coast, you might receive an endorsement that excludes coverage for wind and hail damage. In areas with a history of hail storms, some companies provide only actual cash value coverage instead of full replacement cost for roofs. Actual cash value pays for damage minus depreciation on the roof, depending on its age and condition.

Most policies will not cover mold remediation beyond that necessary to repair or replace property damaged caused by a water loss otherwise covered by the policy. The HO-A policy doesn’t cover mold remediation or damage caused by water leaks, but some companies offer an endorsement that covers sudden and accidental water leaks. Some, but not all, of the other approved policy forms also cover sudden and accidental water leaks. Read your policy or ask your agent whether your policy covers water leaks and mold remediation.

Insurance companies are required to offer you mold remediation coverage. Depending on the company, this coverage will be offered in dollar or percentage increments up to 100 percent of your policy’s limits. If you have questions or concerns about how a mold claim is being handled, or if you need information about how to minimize mold losses, ask your insurance company for a set of guidelines regarding mold claims. Also read TDI’s Handling Water-Damage and Mold Claims publication.

Other Residential Policies

• Renters: A landlord’s insurance does not cover a renter’s personal property. Renters insurance covers your belongings, provides liability protection, and pays additional living expenses if a fire or other disaster forces you to move temporarily from your rented home.
• Condominiums: Condominium insurance matches the benefits of renters insurance, and also covers damage to improvements, additions, and alterations to the condominium unit.
• Townhouses: Townhouses may be insured by either an individual homeowners policy or an association master policy. If a townhouse is owner-occupied and the townhouse association does not have a master policy on the building, you can purchase a homeowners policy on your individual unit. If the association has a master policy, you should get a Texas tenant homeowners policy to insure your personal property.
• Mobile homes: Mobile homes without wheels and resting on blocks or a permanent foundation qualify for a homeowners policy. However, most mobile homes are insured by a mobilowners policy. A mobilowners policy is actually an auto policy that covers mobile homes used as residences. Mobilowners policies offer extremely limited coverage.
• Farm and ranch owners: Farm and ranch owners policies insure homes outside city limits on land used for farming and raising livestock. You can pay extra and get coverage for certain farm equipment and outbuildings.

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.

Replacement Cost Coverage of Your House

The standardized HO-B and HO-C policies provide replacement cost coverage for your house, up to your policy’s dollar limits. Replacement cost is what you would pay to rebuild or repair your home, based on current construction costs. Replacement cost is different from market value and does not include the value of your land. 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.

To receive full payment (minus your deductible) for a partial loss, such as a hail-damaged roof, you must 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 pay only part of the expense of a partial loss.

Unless you buy an endorsement increasing your coverage, HO-A policies only provide actual cash value coverage. 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.

If you have an HO-A amended policy or an approved alternative policy, read your policy carefully to know whether it offers replacement cost coverage or actual cash value coverage.

Your Policy’s Dollar Limits are Important

If you insure your house for $100,000, that’s the most you will get if it’s destroyed, even if it would cost more to replace. The Declarations Page on the front of your policy shows how much coverage you have. Talk with your agent or company representative if you have any questions about your insurance limits. If a fire destroys your home, Texas law requires the insurance company to pay the full amount of the policy, even if this amount is more than the replacement cost.

Don't wait until you have a claim to learn your policy’s limit.

Coverage for Your Personal Property

HO-B policies automatically cover household contents – furniture, clothes, appliances, etc. – up to 40 percent of the amount of your dwelling coverage. This means if your house is insured for $100,000, its contents are insured for up to $40,000. You can get more coverage by paying a higher premium.

Personal property coverage pays only the actual cash value of damaged, stolen, or destroyed household goods unless you buy replacement cost coverage. Actual cash value is an item’s replacement cost, minus depreciation.

Replacement cost coverage offers you more protection than actual cash value coverage. If a burglar steals your six-year-old television set, for example, and you only have actual cash value coverage, you get only what you would expect to pay for a six-year-old television set. With replacement cost coverage, the insurance company pays to replace your TV with a new set similar to the stolen one.

Companies generally want you to prove that you replaced an item before they’ll pay your claim in full.. However, if you have an HO-B policy, the company must advance you the first $1,500, plus the depreciated value of any other damaged property, without requiring proof of replacement. After that, the company must pay you within five business days after receiving proof you replaced, restored, or repaired the property. A company can offer to replace the items instead of paying cash, but the choice is yours.

Take Inventory of Your Property

Many people learn after a fire or storm that they didn’t have enough personal property coverage. Making an inventory will help you decide how much insurance you need. It will also simplify claims.

Your inventory should list each item, its purchase date, value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and garage. Keep the inventory and receipts for major items in a fireproof place or another location.

Homeowners insurance on certain personal items like jewelry and furs is limited. You may be able to buy more coverage for an extra premium.

Other Types of Insurance You Might Need

Flood Insurance

Texas ranks near the top of the nation in weather-related property damage each year. A large portion of this damage is caused by flooding.

Homeowners policies do not cover flood damage. To protect yourself from losses caused by most flooding, you can purchase a separate flood insurance policy from the National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency. Local insurance agents sell NFIP flood policies and can tell you about the program in your area. For more information, call NFIP
1-800-427-4661

If a lender determines that a property is in a special flood hazard area, the borrower is required to purchase flood insurance. A special flood hazard area has a 1 percent chance of being inundated by flood.

Hurricanes and Windstorm Insurance

The Texas Windstorm Insurance Association (TWIA) is the state’s insurer of last resort for wind and hail coverage in the 14 coastal counties and parts of Harris County on Galveston Bay. TWIA provides wind and hail coverage when insurance companies exclude it from homeowners and other property policies sold to coastal residents. You can buy TWIA coverage through local insurance agents if you need it.

When a hurricane enters the Gulf of Mexico (80 degrees longitude and 20 degrees latitude), you can no longer change or purchase new windstorm coverage.

If you plan to build, add to, or renovate a home or other structure and want TWIA coverage, you or your builder should request an inspection by a TDI windstorm inspector or a Texas licensed professional engineer appointed by TDI. Your agent can tell you how to get an inspection. For more information about windstorm coverage, contact TWIA

1-800-788-8247

Earthquake Insurance

If you are concerned about earthquakes, you can get coverage with a separate policy. The cost is relatively low because earthquakes are rare in Texas.

Extra Coverage (Endorsements)

You might want more coverage than your policy provides for certain items. For an extra premium, you may be able to buy endorsements that expand or increase the coverage on these items. Some of the most common endorsements expand or increase coverage for jewelry, fine arts, camera equipment, coin or stamp collections, computer equipment, and radio and television satellite dishes and antennas.

Personal Umbrella Liability Insurance

If you have assets to protect and want more liability coverage than a homeowners policy provides, you can buy a separate umbrella policy. Because policies vary, make sure the agent or company fully explains the coverage.

Shopping for Homeowners Insurance

Rates vary widely among companies, so it pays to shop around. Following are some useful tips to help you find the best deal for your money:

• Decide before shopping the specific coverages and coverage amounts you need.
• Choose the highest deductible you can afford. Your deductible is the amount you must pay yourself before the insurance company will pay. Higher deductibles will lower your premium, but remember that you’ll have to pay more out of your own pocket if you have a claim.
• Because rates vary, ask several companies and agents for price quotes. When comparing rates, make sure they are for the same coverages. TDI publishes a homeowners rate guide that can help you shop. The rate guide lists companies and their annual premiums for policies with $100,000 coverage on the house, $40,000 on its contents, and a 1 percent ($1,000) deductible.
• Ask your agent whether you qualify for discounts.
• When getting a price quote or applying for insurance, answer questions truthfully. Wrong information could cause you to get an incorrect price quote or could lead to a denial or cancellation of coverage.
• Consider factors other than price, including a company’s financial rating, complaint index, and license status. The financial rating indicates a company’s financial strength and stability, and the complaint index is an indication of its customer service record. Buy only from licensed companies and agents. It is against the law to sell insurance without a license in Texas.
• Learn more about a company, including its licenses status, complaint history, and financial rating from an independent rating organization by a calling TDI’s Consumer Help Line or by visiting the TDI website
• 1-800-252-3439
  463-6515 in Austin

Understanding Rates

Texas law requires rates for insurance offered in Texas to be reasonable, adequate, not excessive to the risks for which they apply, and not unfairly discriminatory.

All homeowners companies must file their rates for prior approval with TDI. The rate-filing process is complex, but in general, TDI reviews each company’s filed rates and underwriting guidelines and determines whether the rates and guidelines are appropriate. Companies may appeal adverse rate decisions in an administrative hearing and then in district court. If a company appeals a TDI rate decision, it may implement its filed rates pending the outcome of the appeal. If the appeal determines that the rates were indeed excessive, the company will be ordered to pay refunds, plus interest, to the policyholders it overcharged.

Residential property rates utilize a system called “file and use.” Under this system, companies file their rates with TDI, but they do not need prior approval to implement new rates. If TDI determines that a company’s rates are excessive, the company can be ordered to pay refunds to the policyholders it overcharged. Companies can appeal adverse rate decisions.

A company can change your individual premium only at your policy renewal time.

Factors that Affect Your Premium

Companies may use a number of criteria to establish your individual premium. These include:

• Age and condition of your home. Older homes and homes in poor condition are generally more expensive to insure. Companies may refuse to insure homes in poor condition, but they can’t deny coverage solely because of a home’s age or value.
• Your home’s replacement cost. Since your policy will pay to rebuild your home if it is destroyed by a covered loss, premiums are more expensive for homes with a high replacement cost.
• Construction materials used in your home. Homes built primarily of brick are less expensive to insure than frame homes.
• Where you live. Premiums will likely be higher for homes in areas with a high frequency of storms, such as tornados or hailstorms, or with a high incidence of theft.
• Availability of local fire protection. Homes with access to good fire protection services get better rates. If you live in an area with limited fire protection, your rates will be higher.
• Your claims history. Companies will charge more if you’ve filed claims in the past. Before filing a claim, it’s a good idea to ask your agent or the company’s underwriting department how it will affect your premium at renewal time. For less expensive losses, it may be cheaper in the long run to pay for repairs yourself rather than file a claim. This is especially true for repairs that wouldn’t cost much more than the amount of your deductible.
• Your credit score. Companies may consider your credit score when deciding whether to sell you a policy and what to charge you. However, a company cannot refuse to sell you a policy or cancel or nonrenew your policy solely on the basis of your credit. Companies that use credit scoring must file their models with TDI.

Companies must file their underwriting guidelines with TDI and update them each time they make a change.

Discounts

Discounts can help you save money on your insurance. Companies may offer premium discounts if you take steps to reduce the chances of a loss. Each company sets the amount of the discounts if offers to its policyholders. Some of the more common discounts are listed below:

• Impact-resistant roofs
• Noncombustible roofs
• Burglar, fire, and smoke alarm systems
• Automatic sprinkler systems
• Fire extinguishers
• Home security devices
• Age of house (companies set own standards)
• Premises in good condition (companies set own standards)
• House insured to full replacement cost
• Good claims experience for three consecutive years
• Marking personal property with an identifying number (inspection required)
• Other policies with same company or group
• Senior citizens discount

Having Trouble Insuring Your Home?

If you are having difficulty finding a homeowners policy, it may be helpful to take steps to reduce your chances for a loss. Here are some things you can do:

Remove Potential Risks

You can make your home more insurable by changing things that insurance companies and agents interpret as signs of potential risk. Look around your home for problems that could cause damage or injury, such as a heavy tree limb hanging over your roof, loose porch railings, or cracks in your walkways.

Watch Out for Crime

Since theft is a common cause of homeowners claims, some insurers may not be willing to insure homes that seem vulnerable to crime. While you cannot stop crime by yourself, you can take a few steps to make yourself less vulnerable. These precautions could also lower your insurance premiums.

• Call the crime prevention officers of your local police force. They can inspect your home and give you specific advice on protecting it.
• Install dead bolts or other security devices on doors and windows.
• Work with your neighbors to start a Neighborhood Watch Program. Your local police department has helpful information.
• Install a burglar alarm that alerts the police or a security company.
• Keep trees and shrubs trimmed, especially around windows and entryways. Overgrown shrubbery can provide hiding places for would-be burglars. Avoid parking cars on the street. Cars parked on the street are tempting targets for thieves and vandals and, like overgrown shrubs, can provide handy hiding places.
• Keep the area around your home well-lit.
• Permanently mark personal property with an identifying number to aid in identification if stolen items are recovered.

Maintain Your House and Yard

Your home’s appearance is important when you’re looking for insurance. Since companies want to avoid losses from injuries or accidents, agents look for signs of poor maintenance. Agents might assume that a cluttered yard and faded paint suggest an unsafe home. The outside of your home will be inspected when you apply for insurance, often when you are not at home. Insurance companies have the right to cancel a policy within the first 60 days, and some may reject new customers because an inspection revealed a home in need of repair.

• Fix any obvious signs of damage, such as rotting boards, sagging screens, or a loose front door.
• Remove anything from your property that could easily cause an accident.
• Replace a damaged or badly worn roof. Water stains on a ceiling tell an agent inspecting the inside of your home that you might have a future claim for water-damaged property.
• Keep your yard clean and trim.
• If your paint is peeling or faded, consider repainting.

Other Options for Insuring Your Home

Texans having trouble finding homeowners insurance from licensed companies may have other options for coverage. The following programs may be able to help:

Helpinsure.com

Helpinsure.com is a free and secure service to help Texans shop online for homeowners insurance. When you sign up to participate in Helpinsure.com, agents and companies writing homeowners insurance in Texas will view your information and may contact you to discuss your insurance needs. In addition, you can find lists of companies writing new homeowners insurance in Texas and agents in your area. The Helpinsure.com website also has a Learning Center with useful information for homeowners shopping for coverage. For more information or to sign up, visit the Helpinsure.com website or call the toll-free number

1-866-695-6873

Texas FAIR Plan Association

The Texas FAIR Plan Association provides the standard Texas HO-A homeowners insurance policy form to qualified consumers. To be eligible for coverage, a consumer 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, call TDI or contact the Texas FAIR Plan Association

1-800-979-6440

If you’re still unable to find insurance, your last resort might be to obtain insurance from a surplus lines carrier. Surplus lines carriers are out-of-state companies not licensed in Texas, but legally eligible to sell insurance on risks that licensed companies won’t cover. Surplus lines carriers generally charge more than licensed companies and offer less coverage. Surplus lines carriers are not members of a guaranty association. This means that your claims might go unpaid if the surplus lines carrier becomes unable to pay its claims.

Before you buy from a surplus lines carrier, 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 justify rejections.

Losing Your Insurance

Knowing your rights can help if you are rejected for homeowners insurance or lose your coverage. If you request it, a company must explain in writing its reason for declining, canceling, or not renewing your policy. Texas law prohibits companies from denying, canceling, or refusing to renew a policy solely on the basis of your credit. You may file a complaint with TDI if you believe a company improperly denied you insurance.

CLUE®

Many companies use the Comprehensive Loss Underwriting Exchange (CLUE) to review an applicant’s claims history. CLUE lists the property insurance claims history of houses – regardless of ownership – and individuals for the preceding three years.

Federal law gives you the right to challenge wrong information. If an insurance company based part of its decision to deny you coverage on a CLUE report, you can get a free copy of the report by calling the ChoicePoint Consumer Center or visiting its website

1-800-456-6004

Before calling, get the CLUE reference number from the company’s denial letter or from the company. Using the reference number will speed the process by making sure you are requesting the right report.

CLUE is a registered trademark of Equifax Inc.

Cancellation and Nonrenewal

Cancellation means either you or the insurance company stops coverage before your policy’s normal expiration date.  If either you or the company cancels your policy, the company must refund any premiums paid in advance that did not buy coverage. This amount is called the “unearned premium.” For example, if you paid an annual premium of $600 and you cancel your policy after one month, the company owes you $550 in unearned premium.

Nonrenewal means a company refuses to renew your policy when it expires. A company must give you written notice at least 30 days before your policy’s expiration date. If the company does not notify you in writing in the required time, it must renew the policy at your request.

Note: A company cannot nonrenew or raise your premium because of a claim you filed that was not paid or was not payable under your policy.

Cancellation and Nonrenewal Summary for Residential Policies

Cancellation

Notice Required from Company: 10 days (30 days’ notice is required if the policy is canceled within the first 60 days)

A company may cancel your policy within the first 60 days only if it identifies an undisclosed additional risk of loss that is not the subject of a prior claim.

A company may not cancel your policy after 60 days, except for fraud, increased risk, or nonpayment of premium.

Nonrenewal

Notice required from Company: 30 days

A company may nonrenew your policy for deterioration of your property or if you file three or more nonweather-related claims in three years.

Exceptions:

• If the company fails to notify you after a second nonweather-related claim, it cannot refuse to renew your policy because of a third claim.
• A company cannot use the first two appliance-related claims to determine the number of nonweather-related claims for the purposes of nonrenewing your policy.
• Instead of nonrenewal, the company can charge an added premium called a surcharge. A company can add a surcharge for filing two or more nonweather-related claims in the previous policy year.
• A company may require you to make repairs to your home before renewing your policy. Generally, companies will give you six months to a year to make repairs. If the repairs are needed because of a storm or other covered loss, the company must pay for the work (minus your deductible). If the repairs are required because of deterioration or normal wear and tear – a worn-out roof, for instance – you are responsible for paying for them yourself.

A company may not nonrenew your policy for weather-related claims or for claims that were not paid or not payable under your policy.

Keep in mind that if you move out of your house and it remains vacant for 60 days or longer, most policies automatically suspend coverage for damages. The policy’s liability coverages will continue, however. The vacancy also could cause the company to refuse to renew the policy when it expires.

Your Rights Against Unfair Discrimination

An insurance company cannot deny, refuse to renew, limit, or charge more for coverage because of your race, color, religion, or national origin.

A company also cannot 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.” Sound underwriting or actuarial principles means the company would have to show valid statistical evidence that your home presents a greater risk for a loss than other homes it is willing to insure.

A company cannot unfairly discriminate between individuals of the same rate class and with essentially the same risk in its rates, policy terms, and benefits, or in any other manner unless the refusal, limitation, or higher rate is “based on sound actuarial principles.

In addition, a company cannot refuse to insure a home based solely on its age or low value. Companies can offer discounts for newer homes and require updates to the wiring, plumbing, and heating systems before agreeing to insure an older home.

If You Have a Claim

If you have a claim, the company must start investigating your claim within 15 days after receiving written notice. However, the company may ask you for more information. Once you send the information, the company has 15 business days to accept or reject your claim. If the company agrees to pay, it must do so within five business days. If the company rejects your claim, it must explain its reasons in writing.

Exceptions:

• A company that needs more time can take 45 days to make a decision if it sends you a notice explaining the delay.
• A company that suspects arson has 30 days after receiving the required paperwork to either accept or reject a claim.
• TDI can give companies an extra 15 days after a major natural disaster.
• Surplus lines carriers have 20 days to pay your claim after agreeing to do so.

A company that takes too long to pay is liable for your reasonable attorney fees plus damages equal to 18 percent of your claim if you sue and win. In an insurance claim lawsuit, the insurance company has the burden of proving it was not obligated to pay.

If you are financing your home, your insurance company may require your lender to sign or approve your claim check. When this happens, the lender must act within 10 business days after receiving the request. Failure to act within this time period could result in a $500 civil penalty. Complaints about lenders failing to process claim payments should be directed to the Texas Attorney General’s Office

1-800-252-8011

Claim Tips

To make the claim process run smoothly and to protect your rights, follow these steps:

• Know your coverage. Your policy’s dollar limits and benefits appear on your policy’s Declarations page. If you need help, ask your agent or company representative.
• If you have a loss, notify your agent or insurance company immediately. Report losses involving theft or crime to the police.
• Make a list of your damaged property. If possible, photograph or videotape the damage before making any repairs.
• Make only temporary repairs to protect your house and belongings. The insurance company may deny your claim if you make permanent repairs before it inspects the damage. If you are not sure whether a repair is considered permanent, contact the insurance company before beginning repairs. The cost of these repairs and for storing personal belongings is covered by your policy. It is important to make only temporary repairs.
• Keep receipts. For personal property claims, you must provide evidence that you bought the replacement items. If you bought materials for temporary repairs, receipts will help you get reimbursed quickly.
• Try to be there when the insurance company’s adjuster inspects your home. You may have your contractor or builder with you. Your contractor or builder may discuss estimates or technical specifications with the adjuster or your insurance company.
• If you have to move because of a disaster, make sure your address is visible. Leave a sign with your temporary address, phone number, and the name of your insurance company.

Proof of loss. Within 15 days after you report your loss, the company may request a signed, notarized proof-of-loss form. In most cases, the company will ask you to estimate the replacement cost of the household items you lost and the cost of repairing your home. Contractors, catalogs, and retailers are good sources of current price information.

• Include sales tax in your cost estimates.
• Ask whether you should use exact costs, or if you can round numbers to the nearest dollar.
• Don’t forget to include small items such as kitchen utensils or clothing accessories.
• The company will use the form to decide the value of your claim, so make your list as complete and as detailed as possible. Include photos and receipts. Be sure to keep copies for your records.

Final estimate. The adjuster will prepare an estimate of the cost to repair or replace your home and any personal belongings. The insurance company’s offer is based on this estimate.

Disputes. If you disagree with the adjuster’s estimate, tell the company why. The company may have overlooked something and may make adjustments. If you still disagree, you can use a process called appraisal.

The appraisal process governs only disputes over the amount to be paid. It is not for settling disputes about coverage or the cause of a loss.

You and the company each hire an appraiser. The two appraisers then choose a third one as umpire. Your appraiser and the company’s appraiser make their own estimates of your loss. If they differ, the umpire makes the final decision, which is binding on both you and the company. You are responsible for the expenses of your appraiser and for half of the umpire’s expenses.

Public insurance adjusters. Public insurance adjusters charge fees to help negotiate claim settlements with insurance companies. If you hire a public adjuster, you may have less money to repair or replace your property.

The public adjuster’s fee may be a flat fee, an hourly rate, or a percentage of the amount paid in the settlement of the claim. The method for calculating the commission must be included in the public adjuster’s contract with you, along with a statement that the adjuster’s commission may not exceed 10 percent of the entire claim. In some instances, a public adjuster is entitled only to reasonable compensation for time and expenses.

Public adjusters may not give legal advice and may not participate, either directly or indirectly, in the reconstruction or repair of your damaged property. They are also prohibited from engaging in any activity that would be a conflict of interest. Should you choose to hire a public adjuster, make sure the public adjuster is licensed by TDI. To learn whether a public adjuster is licensed, call TDI’s Consumer Help Line or use the “Insurer Search” feature on TDI’s website.

Payment. Once the company agrees to pay all or part of your claim, it must do so within five business days. If you don’t get your check within five days, contact your agent or company. If you believe that the company is delaying payment intentionally, contact TDI for help.

Note: Most companies pay homeowners claims with two checks. The first, issued after the adjuster reviews your loss, is for the estimated cost of repairs, minus depreciation and your deductible. The company issues the second check for the balance of your claim after receiving the contractor’s bill for the finished job, as long as the repairs or replacements are completed within 365 days of the date of loss. You may submit a written request for an additional 180 days extension.

Getting Help from TDI

Companies are subject to penalties if they fail to settle claims promptly and fairly. If you believe an insurance company has treated you unfairly, first contact your company and try to resolve the problem. Most companies operating in Texas are required to have a toll-free telephone line to provide customer assistance. The number should be listed in your policy. If you are unable to resolve the problem yourself, contact TDI to file a complaint.

You may file an insurance-related complaint with TDI several ways:

• by our website
• by e-mail
• by fax at 512-475-1771
• by mail at
  Texas Department of Insurance
  Consumer Protection (111-1A)
  P.O. Box 149091
  Austin, TX 78714-9091

For More Information or Assistance

For answers to general insurance questions or for information on filing an insurance-related complaint, visit our website or call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday

www.tdi.state.tx.us
1-800-252-3439
463-6515 in Austin

DWELLING & FIRE POLICIES

Texas Dwelling Policy Form 1 is a named-peril policy, which covers the insured’s residence and personal property (if personal property is included) for:

Fire or Lightning, Windstorm, Hurricane & Hail, Explosion, Riot or Civil Commotion, Aircraft & Vehicles, or Sudden & Accidental Damage from Smoke.

Payments for property losses are limited to the actual cash value at the time of loss, with deduction for depreciation (or the cost to repair or replace the covered property. or the limits of liability of the policy, whichever is less).

Limitations, exclusions and conditions apply. Only a reading of the policy form itself can adequately describe what is covered and what is not.

The Texas Dwelling Form 1 can be endorsed to include additional perils: Sudden and Accidental Discharge of Water or Steam, Falling Trees or Limbs, Objects Falling from Weight of Ice, Snow or Sleet, Collapse of Building, Vandalism and Malicious Mischief, and Breakage of Glass . When the additional perils endorsement is added we also include an endorsement which changes the settlement of losses to provide full replacement cost for damages to the dwelling. This is subject to various conditions, such as the requirement that the dwelling be insured for at least 80% of what it would cost to replace it. We refer to this endorsed version of the Dwelling Form 1 as TDP-1Plus.



Condo/Townhome Policy:

Condominiums: Condominium insurance matches the benefits of renters insurance, and also covers damage to improvements, additions, and alterations to the condominium unit.

Townhouses: Townhouses may be insured by either an individual homeowners policy or an association master policy. If a townhouse is owner-occupied and the townhouse association does not have a master policy on the building, you can purchase a homeowners policy on your individual unit. If the association has a master policy, you should get a Texas tenant homeowners policy to insure your personal property.

Renters Insurance Policy:

Renters: A landlord’s insurance does not cover a renter’s personal property. Renters insurance covers your belongings, provides liability protection, and pays additional living expenses if a fire or other disaster forces you to move temporarily from your rented home.

WORKER'S COMP INSURANCE

Workers' Compensation Insurance

 

 

(May 2007)

Introduction

Workers´ Compensation in Texas is regulated by the Texas Department of Insurance (TDI). TDI´s Division of Workers´ Compensation administers the claims process, handles Workers´ Compensation disputes, and provides workplace safety services and enforcement. The Workers´ Compensation Classification, Premium Calculation, and Research Division is responsible for determining the correct employer classifications, determining compliance with rules concerning premium calculation, responding to Workers´ Compensation inquiries, and resolving Workers´ Compensation complaints that pertain to premium and policy issues. In addition, the Classification, Premium Calculation, and Research Division is responsible for research projects on issues such as medical costs, utilization and care trends in Texas, return-to-work outcomes for injured Texas workers, and employer participation in the Texas Workers´ Compensation system.

Workers´ Compensation Basics

The Texas Workers´ Compensation system is the method by which covered workers are compensated for work-related injuries or illnesses. An employer´s insurance company, self-insurance group with a certificate of approval, or an individual employer with a certificate of authority to self-insure pays benefits for work-related injuries, even if the injured worker´s negligence contributed to the accident. However, neither the insurance company nor the employer is liable for injuries that

• are intentional or self-inflicted
• result from the employee´s horseplay or voluntary intoxication (either alcohol or drug-induced)
• arise from voluntary participation in off-duty recreational, social, or sports events
• result from "acts of God," unless a person´s job exposes him or her to a greater than ordinary risk of injury from such acts
• are inflicted by someone else for personal reasons unrelated to employment.

The Texas Workers´ Compensation Act limits a covered employer´s liability to a specific schedule of benefits based on the type and severity of the worker´s injury. Benefits include

• lifetime medical benefits for necessary treatment of compensable injuries and illnesses
• disability income benefits for a specified period of time and up to dollar limits set by law
• limited funeral expenses for workers killed on the job
• death benefits for surviving dependents of workers killed on the job.

Who belongs to the system?

Texas law does not require most private employers to carry Workers´ Compensation insurance. However, private employers that contract with governmental entities are required to provide Workers´ Compensation coverage for each employee working on the public project. In addition, some clients may require their contractors to have Workers´ Compensation insurance. The following employers are considered part of the state´s Workers´ Compensation system:

• employers covered by Workers´ Compensation policies issued by insurance companies licensed to write this type of coverage in Texas
• employers certified by the Division of Workers´ Compensation to self-insure their Workers´ Compensation claims
• employers that are part of a self-insurance group that has received a certificate of approval from TDI
• political subdivisions, which may self-insure, buy coverage from insurance companies, or enter into inter-local agreements with other political subdivisions providing for self-insurance.

Employers without Workers´ Compensation face unlimited liability, including possible punitive damages, if they lose lawsuits arising from workplace accidents. They also lose certain common-law defenses if they are sued over on-the-job injuries. They may not defend themselves by arguing that

• the injured worker´s negligence caused the injury
• the negligence of fellow employees caused the injury
• the injured worker knew of the danger and voluntarily accepted it.

Employee injury cases are more likely to become lawsuits if an employer does not carry Workers´ Compensation insurance. If an employer carries Workers´ Compensation, a case may go to court only after the Division of Workers´ Compensation´s administrative dispute process has been exhausted. If the claim goes to court, the division´s recommendations must be presented, and evidence is limited to the issues in dispute. Resolved issues cannot be reintroduced. The employer´s insurance company is responsible for attorneys" fees and other defense costs.

Be Aware!

So-called "alternative" policies and coverage bought from unlicensed insurers do not count as Workers´ Compensation under Texas law.

Alternative accident and health policies covering employees both on and off the job provide some medical coverage, but they are not considered an equivalent to Workers´ Compensation coverage.

• Alternative accident and health policies contain dollar limits and time limits. If expenses exceed the limit, the employer may be responsible for the excess. Workers´ Compensation policies cover all related medical expenses even if an expense occurs years after the accident.
• Alternative health and accident policies contain limits on lost-income benefits. Again, if the employee´s expenses exceed policy limits, the employer may be responsible.
• The injured worker may still be able to sue the employer for damages even if a claim is covered under an alternative health and accident policy.

Shopping for Workers´ Compensation Insurance

With a broad range of rates available, plus the use of competitive rating tools such as deductibles, schedule rating plans, retrospective rating plans, downward negotiation of experience modifiers, and group purchase of Workers´ Compensation as potential money savers, it is important for employers to shop around before buying coverage. (Schedule rating plans tell what discounts – or penalties – an insurer may give, based on its analysis of your workplace.)

The Texas Workers´ Compensation Rate Guide shows the latest relativities, each insurance company´s filed rate level, schedule rating information, and telephone numbers for contacting the companies. You may view the rate guide on TDI´s website

www.tdi.state.tx.us

It´s also important to buy from licensed companies. Licensed companies are covered by the Texas Property and Casualty Guaranty Association, which pays claims for insurers who become insolvent and are unable to pay their claims. Claims against unlicensed insurers could go unpaid if the insurer becomes insolvent. You can learn whether a company is licensed by calling TDI´s Consumer Help Line

1-800-252-3439

Most companies generally will not write a policy unless you have at least one part-time employee or anticipate having an uninsured contractor do work for you while the policy is in effect. Some companies, however, may write a policy to cover executive officers of a corporation that has no other employees.

Volunteers of organizations may be covered by a Workers´ Compensation policy only in certain circumstances:

• Volunteers of a political subdivision, such as volunteer firefighters, police officers, and emergency medical personnel may be covered if the policy contract includes a special endorsement.
• Emergency service organizations separate from a political subdivision may cover their volunteer members who participate in the normal functions of the organization if the policy contract includes a special endorsement.

Volunteers who are not employed by a political subdivision or an emergency service organization may not be covered under a Workers´ Compensation policy.

If you"re unable to find Workers´ Compensation insurance through the voluntary market, Texas Mutual Insurance Company is the insurer of last resort in Texas. Texas Mutual has a special program called START for employers who cannot buy Workers´ Compensation coverage in the voluntary market.

Employers who obtain coverage through the START program generally pay higher premiums than those who buy Workers´ Compensation coverage in the voluntary market.

Workers´ Compensation Rates

Rates are based on the employer´s type of business. Employers are assigned one or more classifications based on the type of business the employer is engaged in. Each employer´s payroll is assigned to the appropriate classification. The total payroll for each classification is then multiplied by the insurance company´s filed rate for that classification (rate per $100 payroll) to determine the estimated annual premium for the classification. This amount may be further adjusted to reflect an employer´s specific risk profile – for example, through the use of experience and schedule rating and any deductible that the employer might have purchased. An "expense constant," which is comparable to an issuance fee, is then added to this premium. Insurance companies charge different rates for each of the approximately 400 industry classifications.

If an employer is not certain that the proper classification is shown on the Workers´ Compensation policy, the employer can submit a detailed description of work operations to TDI´s Workers´ Compensation Classification Section.

Texas law forbids employers to collect from employees, directly or indirectly, any fee for obtaining Workers´ Compensation coverage. The Texas Workers´ Compensation Act, however, provides some exceptions for independent contractors and certain building and construction workers, provided the appropriate form is completed and filed with the Division of Workers´ Compensation.

Saving Money

Deductibles offer lower premiums to employers willing to reimburse the insurance company for part of their Workers´ Compensation claim costs out of their own pockets. Only employers with estimated annual premium of more than $5,000 are eligible for deductible plans.

The standard deductible plans are:

• Per Accident Deductible Option. It offers deductibles of $1,000, $2,000, $5,000, $10,000, and $25,000 per accident, not to exceed 50 percent of the employer´s estimated annual premium.
• Aggregate Deductible Option for all accident claims covered during the policy period. Deductibles range from $2,000 to 100 percent of the employer´s estimated annual premium, up to a maximum of $100,000.
• Per Accident/Aggregate Deductible Option, which is a combination of the two options listed above.

Employers having either estimated annual premium in excess of $100,000 or desiring higher deductibles than offered in the standard deductible plan may negotiate their deductible with their insurance company.

For all deductible options, when a claim occurs, the insurance company pays it, and the policyholder reimburses the insurer up to the amount of the deductible. An insurer may require a policyholder to provide security for the deductible amount, in addition to requiring a deposit premium for the policy.

Certified/Approved Self-Insurance

Some private employers may self-insure their Workers´ Compensation claims, provided they are certified by the Division of Workers´ Compensation as a qualified self-insurer. To qualify, an employer must

• provide information to the division on profitability, previous Workers´ Compensation losses, and number of workers to be covered
• have division-certified safety programs at all job sites
• provide a minimum security deposit of $300,000 or 125 percent of the employer´s existing Workers´ Compensation liabilities, whichever is greater
• have a minimum of $5 million of excess insurance coverage
• have a total unmodified Texas premium of at least $500,000 or nationwide premiums of $10 million
• pay fees and taxes necessary to support the administration of the program, including establishment of a guaranty fund for self-insured employers.

Private employers may also self-insure by joining with four or more private employers to establish a Workers´ Compensation self-insurance group and obtaining a certificate of approval from TDI. The employers in the group must

• be engaged in the same or a similar type of business
• be members of a bona fide trade or professional association that has been in existence in Texas for purposes other than insurance for at least five years before the establishment of the group
• enter into agreements to pool their liabilities for Workers´ Compensation benefits and employers" liability in Texas
• provide required information to TDI, such as financial information about the members of the group, the governing classification code of the group or a description of operations for each member of the group showing that the members of the group are engaged in similar operations, and evidence of the required performance bonds
• provide a minimum security deposit of $300,000 or 25 percent of the group´s total incurred liabilities for Workers´ Compensation
• have an estimated annual premium subject to an experience modifier of at least $250,000 during the group´s first year of operation and an annual standard premium of at least $500,000 thereafter
• have a minimum of $5 million per occurrence of excess insurance
• pay fees and taxes necessary to support the administration of the program.

Group Purchase

With TDI approval, employers in similar lines of business may form groups to purchase Workers´ Compensation insurance. An insurer willing to provide coverage for the group will use its filed rates. Each member of the group buys its own individual policy and retains its own experience modifier. However, premium discounts are based on the total premium for the group. In addition, specialized safety programs and dividends paid by the insurance company may result in added benefits or savings.

Retrospective Rating

Retrospective rating is an optional plan that offers employers potential savings as an incentive for workplace safety. Retrospective rating must be elected within the first 60 days of the policy period. An employer´s premium is adjusted six months after the end of the policy period, based on the actual claims. Further adjustments occur each year thereafter until all claims for the period are closed or the premium reaches a pre-selected maximum. Premium adjustments reward employers when claims are low. If claims are high, however, the employer may pay more than the standard premium, subject to the pre-selected maximum.

There are several retrospectively rated plans available to employers with a minimum standard annual Workers´ Compensation premium of at least $15,000. "Option Five" is the most frequently used retrospective rating plan and is available to employers with minimum standard annual premiums of $25,000. It allows employers to negotiate for both a minimum and maximum premium. In addition, an employer may negotiate a plan that includes other lines of insurance such as automobile and general liability.

The Large Risk Alternative Rating Option is for employers with at least $100,000 in estimated Texas standard annual premiums (or $350,000 for all states where they operate). Policyholders and insurance companies may negotiate retro factors under this plan. This plan cannot be negotiated to include other lines of insurance.

Experience Rating

Experience rating is mandatory for employers with either

• annual Workers´ Compensation premiums of at least $10,000 and a one-year experience history
• an average premium of $5,000 and at least two years of experience.

Experience rating rewards employers with losses that are less than expected and penalizes those with losses that are greater than expected. Insurance companies calculate experience modifiers based on claim information for the past four policy years, excluding the most recent policy year. An employer´s actual losses are compared with the expected losses for businesses with similar job classifications and payrolls. If losses are less than expected, the employer gets a credit modifier that reduces the employer´s premium. If losses are higher than expected, a debit modifier increases the employer´s premium.

Employers with premium too low to qualify for experience rating also can benefit from a premium incentive plan. Businesses with an estimated annual premium of less than $5,000 are eligible for a 10 percent discount if they had no compensable lost-time injuries during the most recent one-year period. The discount increases to 15 percent if there were no compensable lost-time injuries during the most recent two-year period. However, if an employer had one lost-time injury during the previous one-year period, no discount is allowed. If there were two or more lost-time injuries, a 10 percent surcharge is applied.

Insurance companies are required to calculate experience modifiers. Most insurance companies contract with third parties, such as the National Council on Compensation Insurance (NCCI), to calculate experience modifiers on their behalf.

Your insurance company must send you a free copy of the experience modifier calculation and a plain-language letter explaining the calculation. This letter also explains your right of appeal and offer you a free copy of the statistical data used in calculating your modifier.

If your experience modifier is calculated during the policy period, your premium will be affected in the following ways:

• Any decrease in premium due to the application of the experience modifier is applicable retroactive to the effective date of the policy or to the anniversary rating date, if different than the effective date of the policy.
• Any increase in premium due to the application of an experience modifier shall be implemented as follows:
  • For modifiers that are issued and endorsed onto the policy within the first 60 days of the effective date of the policy or within the first 60 days after the anniversary rating date, the increase in premium due to the application of the experience modifier is applicable retroactive to the effective date of the policy or to the anniversary rating date, if different than the effective date of the policy.
  • For modifiers that are issued within the first 60 days of the effective date of the policy or within the first 60 days after the anniversary date rating date, but are not endorsed onto the policy within the first 60 days after the anniversary rating date, the increase in premium due to the application of the experience modifier is computed pro rata from the date the modifier is endorsed onto the policy.
  • For experience modifiers that are issued after the first 60 days of the effective date of the policy or after the first 60 days after the anniversary rating date, any increase in premium due to the application of the experience modifier is computed pro rata from the date the modifier is endorsed onto the policy.

Appealing an Experience Modifier

Employers who disagree with their experience modifier should first try to resolve the dispute with their company. If the dispute cannot be resolved, you can file a written request for a ruling by TDI´s Deputy Commissioner of Workers´ Compensation Classification, Premium Calculation, and Research. The Deputy Commissioner will allow both sides to make informal arguments in person or by telephone. The Deputy Commissioner´s ruling will be in writing. Either party may appeal the Deputy Commissioner´s ruling to the Commissioner of Insurance. Any hearing will be conducted by the State Office of Administrative Hearings. If the parties consent, the Commissioner may issue a decision based on written arguments, without a hearing. Written requests for action by the Deputy Commissioner should be mailed to

Deputy Commissioner
WC Classification, Premium Calculation, and Research, MC 105-2A
Texas Department of Insurance
P.O. Box 149104
Austin, Texas 78714-9104

You may also try to negotiate your experience modifier downward with your company. Reasons for negotiating a lower modifier include, but are not limited to, improved loss ratios and improved safety programs. For a risk with operations in both Texas and other states, a negotiated modifier applies only to the Texas portion of the premium.

Employer Responsibilities

An employer must fully disclose to the insurance company

• the true ownership and payroll of the company
• information relating to operations
• any change in ownership or operations.

Employers who choose not to have Workers´ Compensation insurance also have certain responsibilities. These employers must

• file an annual notice of no coverage with the Division of Workers´ Compensation
• prominently display English and Spanish notices of non-coverage in the personnel office and throughout the workplace
• give a written statement of non-coverage to each new employee when hired
• report certain Workers´ Compensation claims to the Division of Workers´ Compensation.

Insurance Company Responsibilities

Insurance companies licensed to write Workers´ Compensation in Texas must provide the following accident prevention services at no charge to policyholders:

• safety surveys, recommendations, and training programs
• safety consultations, including analysis of accident causes, industrial hygiene information, and industrial health services.

Insurance companies are required to notify employers of claims against their Workers´ Compensation policies. Upon written request, the insurance company must tell the policyholder of any settlement proposal and any administrative or judicial proceeding to resolve the claim. An employer may waive this notice requirement. Employers may request further notifications relating to an individual claim.

If requested in writing, insurance companies must provide you with a list of all claims against your policy, payments made or reserves established for those claims, and a statement of their effect on the policy premium.

Canceling a Policy

An employer can cancel a policy before its expiration date by notifying the insurance company and the Division of Workers´ Compensation (by certified mail). The insurance company must refund any unused ("unearned") premium.

An insurance company may cancel or refuse to renew a policy. The company must provide advance notice to the policyholder and to the Division of Workers´ Compensation by certified mail. Ten days" notice is required if a policy is canceled or non-renewed for such reasons as delinquent premium payments or fraud. Cancellation or non-renewal for most other reasons requires 30 days" notice.

Although an insurance company may not charge a penalty if you choose to cancel your policy, there may be penalties involved if the policy is subject to retrospective rating or a deductible plan. Be sure to check about penalties before you cancel a policy.

For More Information and Assistance

For answers to general insurance questions of for information about filing an insurance-related complaint, visit our website or call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday

www.tdi.state.tx.us
1-800-252-3439
463-6515 in Austin

For printed copies of free consumer publications, call the 24-hour Publications Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

For information about Workers´ Compensation claims, call the Injured Worker Hot Line or contact your local field office

1-800-252-7031

For information about Workers´ Compensation policies, call the Workers´ Compensation Classification, Premium Calculation, and Research Division

512-322-3495

You may file a complaint concerning Workers´ Compensation claims, benefits, and workplace safety by contacting any Division of Workers´ Compensation field office or the main office in Austin

1-800-372-7713
804-4000 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.

Commercial Auto Insurance

If you own or lease company vehicles, you will need a commercial auto insurance policy.  In many ways, these policies are similar to personal auto policies with Bodily Injury Liability Coverage, Physical Damage, Comprehensive and Collision Coverage.  However, there are many differences which is why you should contact me if you either have or are ready to buy commercial auto insurance.

For instance, a business may utilize employees driving their personal autos to make bank deposits, run to the office supply store or to commute from the office to seminars.  Throughout any of these instances, your business may be at great risk of exposure should they be involved in an auto accident.  This is why it is so important that you carry hired and non-owned auto coverage.  

I can help you make these difficult choices while getting you the best rate for your policies.  I will help you find flexible policy options while providing you with outstanding customer service.

Property Insurance

Property insurance can be either for a building you own and/or the contents you have and need protection from covered perils such as fire, wind and theft.  It only takes one quick lightning strike or sudden wind storm to create a catastrophy that can erase a business in seconds.  With the proper coverage and policy type, we can greatly reduce the possibility of your life's work and security being taken away from you because of no fault of your own.