2.1 Texas Homeowners Insurance Requirements
Key Takeaways
- Texas uses its own simplified Homeowners forms - HO-A (basic, named-peril), HO-B (broad, the historical default), and HO-C (special/open-peril on the dwelling) - which differ from ISO national forms; HO-C is the form most like the ISO HO-3.
- Two residual (last-resort) markets backstop hard-to-insure property: TWIA writes wind and hail in the designated coastal catastrophe-area counties, and TFPA (the Texas FAIR Plan) writes basic property coverage statewide for applicants the voluntary market has declined.
- TWIA applicants must be declined by the voluntary market and the structure must meet building-code/WPI-8 certification; separate percentage 'named storm' or windstorm deductibles (commonly 1%, 2%, or 5% of Coverage A) apply and must be disclosed in writing.
- Standard homeowners and TWIA/TFPA policies exclude flood - flood is covered separately through the NFIP or a private flood policy - so the producer must disclose the flood exclusion to the applicant.
- Texas mandates a plain-language Consumer Bill of Rights with every homeowners policy and limits cancellation/non-renewal; a single claim generally cannot be the sole basis for non-renewal, and settlement is on a replacement-cost or actual-cash-value basis depending on the form and endorsements.
Texas Homeowners Policy Forms
Texas does not simply adopt the national ISO (Insurance Services Office) homeowners forms. Instead, the Texas Department of Insurance (TDI) developed a set of simplified state forms identified by letters rather than numbers. The exam expects you to recognize these three:
- HO-A (basic form) - the narrowest. Both the dwelling (Coverage A) and personal property (Coverage C) are written on a named-peril basis, meaning a loss is covered only if the cause is on the policy's list.
- HO-B (broad form) - historically the most common Texas homeowners form. It insures the dwelling against a broader list of named perils and is the policy most Texans carried for decades.
- HO-C (comprehensive/special form) - the broadest. The dwelling is written on an open-peril ("all-risk") basis - covered unless specifically excluded - while personal property is usually still named-peril.
The single most testable comparison is this: HO-C is the Texas form most similar to the national ISO HO-3, because both put the dwelling on an open-peril basis and contents on a named-peril basis. Open-peril coverage shifts the burden of proof to the insurer - to deny a claim, it must show the loss falls under an exclusion. Under a named-peril form, the insured must show the loss came from a listed peril.
Why does Texas use its own forms? TDI tailored them to the state's exposures and consumer protections. A producer placing Texas homeowners business must use TDI-approved forms and endorsements; Texas-specific endorsements (such as expanded water-damage or mold coverage) are added by endorsement rather than built into the base form.
Coverages A-F and the loss-settlement basis
Like the national homeowners program, a Texas homeowners policy is organized into the standard section-I property coverages and section-II liability coverages:
| Coverage | What it insures |
|---|---|
| A - Dwelling | The house and attached structures |
| B - Other Structures | Detached garage, fence, shed (often 10% of A) |
| C - Personal Property | Contents/belongings (often 50-70% of A) |
| D - Loss of Use | Additional living expense while the home is uninhabitable |
| E - Personal Liability | Bodily injury/property damage the insured is liable for |
| F - Medical Payments | Small medical bills to others, regardless of fault |
The loss-settlement basis is a frequent exam point. Replacement cost (RC) pays to repair or replace with like kind and quality without deducting depreciation, while actual cash value (ACV) is replacement cost minus depreciation. Dwellings on broader forms are typically settled at replacement cost (subject to coinsurance); personal property is often ACV unless a replacement-cost endorsement is added.
Texas Residual Markets: TWIA and the TFPA
When a property cannot find coverage in the regular voluntary market, Texas provides two residual market (last-resort) mechanisms. Confusing the two is a classic exam trap, so anchor on what each covers and where.
TWIA - Texas Windstorm Insurance Association
TWIA is the residual market for windstorm and hail in the designated coastal catastrophe area - the first-tier coastal counties (commonly described as the 14 seacoast counties) plus a designated portion of Harris County (the Houston ship-channel area). Because private insurers limit hurricane exposure along the coast, TWIA exists so coastal owners can still buy wind/hail protection. Key rules tested on the exam:
- The applicant must first be declined by the voluntary market.
- New or repaired construction generally must meet windstorm building-code certification (WPI-8) to be eligible.
- TWIA covers wind and hail only - not fire, theft, or liability - so it is layered behind a separate homeowners policy.
- A separate windstorm/named-storm deductible applies (see below).
TFPA - Texas FAIR Plan Association
The TFPA, known as the Texas FAIR Plan, is the residual market for property owners statewide who cannot obtain coverage in the voluntary market for reasons other than coastal wind (for example, an older roof, prior claims, or location). "FAIR" stands for Fair Access to Insurance Requirements. The TFPA writes a basic homeowners/dwelling policy (fire and allied lines, with limited theft and liability), and eligibility again requires that the voluntary market has declined the risk.
| Feature | TWIA | TFPA (FAIR Plan) |
|---|---|---|
| Peril covered | Wind and hail only | Basic property (fire/allied lines) |
| Territory | Coastal catastrophe-area counties + part of Harris | All of Texas |
| Eligibility | Declined by voluntary market; WPI-8 cert | Declined by voluntary market |
| Role | Coastal wind backstop | General hard-to-place backstop |
Memory hook: TWIA = Wind (coast); TFPA = Fire (statewide FAIR Plan). Both are last-resort markets.
Windstorm Deductibles, Flood, and Consumer Protections
Named-storm / windstorm percentage deductibles
Unlike a flat dollar deductible, coastal Texas policies typically apply a percentage deductible to hurricane or named-storm losses, expressed as a percent of Coverage A (dwelling). Common options are 1%, 2%, or 5% of the dwelling limit. On a home insured for $300,000, a 2% windstorm deductible is $6,000 before the insurer pays anything for that loss. Because this can dwarf an all-other-perils deductible, Texas requires the windstorm/named-storm deductible to be clearly disclosed and acknowledged in writing.
Flood is excluded - NFIP and private flood
Standard Texas homeowners forms and TWIA/TFPA policies exclude flood. Flood (rising surface water, storm surge) is covered separately through the federal National Flood Insurance Program (NFIP) or a growing private flood market. A hurricane therefore implicates a homeowners policy (wind), TWIA (coastal wind/hail), and a separate flood policy (water) - a layered structure the exam loves to test. The producer must disclose the flood exclusion.
The Texas Consumer Bill of Rights and cancellation/non-renewal limits
TDI requires a plain-language Consumer Bill of Rights to be delivered with every homeowners policy. It summarizes the policyholder's rights - to information, to fair claim handling under the Prompt Payment of Claims Act, to file complaints with TDI, and to protections around cancellation and non-renewal.
Key statutory protections the exam tests:
- Non-payment of premium can support cancellation on shorter notice; most other mid-term cancellations and non-renewals require advance written notice (commonly 60 days for non-renewal).
- An insurer generally cannot non-renew a homeowners policy solely because the insured filed a single claim (certain weather or appliance-leak claims are protected).
- The insurer must give the reason for non-renewal on request, and the insured may seek review by TDI.
- Underwriting must not be unfairly discriminatory.
These protections - forms, residual markets, disclosures, and the bill of rights - make Texas property regulation distinct from a pure ISO approach.
A homeowner in Galveston (a coastal catastrophe-area county) cannot buy hurricane wind coverage from any standard carrier. Which mechanism is designed to provide that coverage, and what does it cover?
Which statement best describes how the Texas HO-C form differs from the HO-A form, and which national ISO form HO-C most resembles?
A Texas home is insured with Coverage A of $400,000 and carries a 2% windstorm deductible. A named hurricane causes $50,000 of wind damage to the roof. How much is the windstorm deductible the insured must absorb before the insurer pays?
A storm surge from a hurricane floods a coastal home's first floor, and the wind tears off shingles. Which coverage arrangement correctly matches each cause of loss?