When it comes to homeowners insurance, everything is certainly bigger in Texas. In 2008, the Insurance Information Institute reported that Texans paid nearly double the national average in homeowners insurance premiums, or $1,460 per home, per year. There are no Texas laws that enforce home insurance coverage, but most lenders may require you to insure a mortgaged home.
Depending on your lender, you may be required to purchase home insurance coverage as a stipulation of your mortgage. Once the mortgage is paid off, you can drop the required coverage.
Texas law states that while your bank lender can require homeowners insurance on your mortgaged home, the lender cannot request coverage that exceeds the value of the replacing the dwelling and your personal possessions, regardless of the total mortgage loan amount. When determining the replacement cost of the home, the bank lender also cannot take the home's fair market value into account, which could raise your overall coverage requirement.
Flood Insurance Requirements
If you live in a "special flood hazard area," which means that you have a one-percent or higher risk of annual flood damage, your lender can require you to obtain flood insurance from the NFIP, or National Flood Insurance Program. You are also required by law to purchase flood insurance from the NFIP before you can purchase hurricane insurance from the TWIA, or Texas Windstorm Insurance Association, but only if you live on the Gulf Coast, reside in flood zones V, VE, or V1-V30, or have constructed, altered or remodeled your property after Sept. 1, 2009. The Federal Emergency Management Agency website provides flood zone maps for Texas counties, as well as the TWIA and NFIP websites (see Resources).
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Texas FAIR Program
According to the Texas Department of Insurance, homeowners that cannot afford or are denied homeowners insurance have options when it comes to affordable coverage. The Texas FAIR, or Fair Access to Insurance Requirements Plan, provides high-risk pool insurance to Texans who have been denied basic, lender-required coverage due to their property's risk factors. The Texas FAIR and the Help Insure website (see Resources) can help you determine how much coverage you need.