How to read your homeowner insurance policy

The average homeowner’s insurance policy is 40-80 pages of legal language. Most people read 1-2 pages of it (the declarations) and skip the rest. The skipped pages are where claims get denied.

This guide walks through what to look for in a Houston homeowner policy and what the language actually means in practice.

The declarations page (page 1)

The first 1-3 pages of your policy summarize the key terms. This is what you actually need to know for day-to-day:

• Coverage A: Dwelling coverage limit. The maximum the insurer pays to rebuild your home. Should be approximately your home’s replacement cost (cost to rebuild today, not market value).
• Coverage B: Other structures. Detached garages, sheds, fences. Usually 10% of Coverage A.
• Coverage C: Personal property. Furniture, electronics, etc. Usually 50-70% of Coverage A.
• Coverage D: Loss of use. Hotel/temporary housing if your home is uninhabitable.
• Coverage E: Personal liability. Lawsuits if someone is injured on your property.
• Coverage F: Medical payments. Smaller medical claims.
• Deductibles. What you pay before insurance kicks in.
• Wind/hail deductible. Often separate and percentage-based. Read this one carefully.

Deductibles — especially wind/hail

Most Texas homeowner policies have two deductibles:

• Standard deductible: Usually $500-$2,500 flat. Applies to fire, theft, water damage from internal causes.
• Wind/hail deductible: Often 1-5% of your dwelling coverage limit, applied separately to wind and hail damage.

The wind/hail deductible is where Houston homeowners get surprised. On a $500K home with a 2% wind/hail deductible, your out-of-pocket on a storm claim is $10,000, not the $1,000 standard deductible you might be thinking of.

Some Texas policies have even higher percentages — 5% wind/hail deductible on a $750K home is $37,500 out-of-pocket per storm event. Check your declarations page now. If your wind/hail deductible is more than you can write a check for, talk to your agent about reducing it (premium goes up; predictability goes up too).

Critical: Wind/hail deductibles are usually separate from your standard deductible AND apply per-event. Two storms in one year = two wind/hail deductibles. Plan accordingly.

ACV vs RCV — the most important policy distinction

Two ways insurers can pay claims:

Actual Cash Value (ACV)

Insurer pays the depreciated value of damaged property. A 15-year-old roof has lost 50%+ of its “value” from depreciation; ACV pays 50% of replacement cost. You make up the difference out of pocket.

Replacement Cost Value (RCV)

Insurer pays the full cost to replace damaged property at current prices, with no depreciation deduction. Most modern policies are RCV — but read yours to confirm.

Check your policy for the dwelling coverage type. RCV is what you want. If your policy is ACV, talk to your agent about upgrading — the premium difference is usually small; the claim difference is enormous.

Note: even RCV policies often pay actual cash value first and release the depreciation portion (recoverable depreciation) only after work is completed. This is normal — but it means you need cash flow during the project to bridge the gap.

Coverage limits A through F

Each coverage has a separate limit. Things to verify:

• Coverage A (Dwelling): Should approximately equal your home’s replacement cost. Get a current rebuild estimate every 3-5 years; construction costs in Houston have risen significantly.
• Coverage B (Other structures): Make sure detached garages, large sheds, pools/pool houses are adequately covered. Default 10% may not be enough if you have substantial accessory structures.
• Coverage C (Personal property): Default 50-70% is rough. Take an inventory of valuable items and verify the limit covers replacement.
• Coverage D (Loss of use): Make sure the limit covers 6-12 months of comparable temporary housing in Houston.
• Coverage E (Personal liability): Most policies default to $100K-$300K. Most Texas attorneys recommend $500K+ for any homeowner with substantial assets.
• Coverage F (Medical payments): Smaller; rarely needs adjustment.

Exclusions you need to know

Standard Texas homeowner policies exclude:

• Flood damage. Period. You need a separate NFIP flood policy or private flood insurance. Texas thunderstorm flooding is NOT covered by homeowner policies.
• Earthquake. Rare in Houston but technically excluded.
• Mold — often partially excluded or sublimited. Read the mold rider carefully.
• Wear and tear / aging. Insurers don’t pay for damage from gradual aging — only from specific covered events.
• Faulty workmanship. If contractor installation caused the damage, the insurer may deny.
• Continuous water damage. Long-running plumbing leaks (not sudden bursts) often excluded.
• Insect/rodent damage. Termites, rodents — typically excluded.
• Government action. Eminent domain, code enforcement actions.

The most common Houston denial scenarios trace to these exclusions. If your home flooded, that’s NFIP, not your homeowner’s policy. If your roof aged out and is now leaking, that’s likely wear-and-tear (not covered).

Sublimits and caps

Beyond the major coverage limits, policies have sublimits on specific items:

• Jewelry, watches: Often capped at $1,000-$2,500 unless scheduled separately.
• Firearms: Often capped at $2,000-$2,500 for theft.
• Cash, securities: Often capped at $200-$500.
• Electronics: Sometimes sublimited.
• Mold remediation: Often capped at $5K-$10K.
• Sewage backup: Often capped or excluded without a rider.
• Service line coverage: Underground utility lines — often excluded or sublimited.

Sublimits matter most after losses. Verify yours match your actual exposure.

Policy conditions

The middle section of the policy describes what you must do to maintain coverage:

• Notice of loss. You must notify the insurer of damage promptly — usually within 30-60 days. Failure to give timely notice can void coverage.
• Mitigation duty. You must take reasonable steps to prevent further damage. Tarping a leak is mitigation; ignoring it is not.
• Documentation duty. You must document damage, retain receipts for emergency expenses, and provide records to the insurer.
• Cooperation duty. You must cooperate with investigation, examination under oath, and document requests.
• Suit limitation. Most Texas policies limit you to 2 years from denial to file suit (Texas Insurance Code Chapter 542).

Texas-specific language

• Texas Insurance Code Chapter 542. Sets prompt-pay deadlines for insurers (most claims must be acknowledged within 15 days, accepted/rejected within 35 days, paid within 5 days of acceptance).
• Anti-concurrent causation language. Many Texas policies exclude losses where flood and wind both contributed (the “wind-vs-water” problem common in hurricanes). Read carefully.
• Hurricane deductible. Some Texas policies have a separate hurricane deductible (different from wind/hail) triggered specifically for named storms.
• TWIA (Texas Windstorm Insurance Association). If you’re in a coastal county including Galveston, you may need separate TWIA policy for windstorm coverage.

When to update your policy

Talk to your agent if:

• It’s been more than 3 years since you reviewed coverage.
• You’ve made significant home improvements (renovations, additions, expensive finishes).
• Your home value has appreciated substantially.
• Construction costs have risen substantially (they have).
• You’ve acquired valuable items that need scheduling (jewelry, art, collections).
• Your wind/hail deductible is higher than you can comfortably absorb.
• Your policy is ACV instead of RCV.
• You’re in a flood zone but don’t have NFIP coverage.

Insurance is one of those things where the cost of getting it right is small and the cost of getting it wrong is enormous. An hour with your agent every few years pays for itself many times over.