Home Insurance Policy

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Texas Home Insurance Renewal Premiums Are On The Rise

Are you getting sick of your Texas home insurance premium increasing with no idea why?

This article explains some of the factors that can affect your homeowners insurance in Texas.

There is going to be a surprise waiting for you in your mailbox and it is not the kind of surprise that you are going to like. Texas home insurance premiums are going up this year at a pace I have not seen for more than 20 years!

Not every one is going to get hit with big rate increases, but if you do get hit, there are ways for you to minimize the overall impact to your budget and still keep your coverage. But before we get into that, lets try to figure out what is happening here.

Providing the best Texas insurance quotes online.

Are the Rate Increases Caused by Natural Disasters?

To a certain degree, yes. I have to believe that some of the increase can be traced to the catastrophic losses of 9/11 Attack on the World Trade Center. It is estimated that the total losses from the tragedy will go over $70 Billion Dollars, that is $70,000,000,000. There is no question that the money necessary to pay for the destruction and losses will come from almost every insurance company in one way or another. But the premium increases forhome insurance had started long before that fateful day.

Insurance Premiums on Homeowner Policies Have Gone Up Less Than 2% Per Year the Past 10 Years.

I am sure you are saying, How can that be, it seems that my rates have gone up every year? You are partially right. The total premium may have gone up, but the amount of coverage has also gone up to keep pace with the increasing cost of construction and materials used to rebuild houses. Inflation has continued to increase and push the cost of replacing homes and property higher year after year. Your policy adjusts the coverage on your home each year in an attempt to make sure you have enough coverage in the event of a catastrophic loss.

It’s a Fact: Insurance Companies Made a Lot of Money in the Stock Market During the 1990s and That Was Good For You.

Insurance companies invest their money just like everyone else. During the 1990′s they made money on their investments just like everyone else. In fact, many home insurance companies were willing to write insurance at a loss because they knew they could make it up on investment income.

For most of the 1990′s, insurance companies were able to keep your premiums lower than they would have been because investment income they earned more than offset the losses they paid out. As consumers, we really shouldn’t have a problem with that, part of our premium is offset by the insurance companies investments, resulting in lower premiums.

Then…the Stock Market started to fall apart in the middle of 1999.

All of a sudden, the investment income fell off, but the losses didn’t. Insurance companies were now faced with the prospect of mounting losses if they kept the rates at the low level. One of several options was to increase premiums across the board and increase they have.

No Loss Discounts and Loss Surcharges Affect Your Premium

Clients that do not turn in claims make insurance companies lots of money and should be charged lower rates.

Sounds pretty simple doesn’t it? Unfortunately, the rule works the other way, too. Insurance companies are going out of their way to give clients without losses discounts and premium credits to reward them for not having a claim.

If you have a claim or two, you can expect to pay a higher premium for a few years. We know no one plans to have a claim, in fact it’s a real pain to go through the process, but it’s no different than auto rates going up if there is an accident.

One other problem is the size of losses have gone out of sight! We have seen the average size of closed claims in our office go from $2,350 in 1993 to over $6,425 in 2002. The fact is that it just costs more money to make repairs to houses today than it used to.

Big changes are happening in the insurance market.

Deductibles Can Save You BIG Money!

Back in the days when I first started in the business, homes were insured for $35,000 and the policies had a $50 deductible. In the late 1970 the value of homes headed towards $75,000 and the deductibles went to $100. By the end of the 1980′s a $250 deductible was standard on almost all policies written for homes valued over $100,000. Today, with the values of many homes costing more than $175,000 many of our clients are using $500 to $1,000 deductibles to keep the cost of their insurance down.

If insurance companies want to reduce your premium for not turning in claims, you might as well save even more money by increasing your deductible. While you wont save enough to make up the deductible in one year, you will be surprised how much you do save over a few years.

How Much Homeowners Coverage Should I Have?

So how much insurance should you have? Basically, unless you want to pay some of the costs yourself, you should insure your home for what it would cost to rebuild it if your residence were destroyed.

How do you find this out? In the home construction world, building costs are calculated on a square foot basis. We can calculate the estimated replacement cost for your home. Give us a call and we will be glad to update our records and send you a copy for your review.

Your possessions are also insured on a replacement cost or actual cash value basis. Again, unless otherwise specified, the coverage in your policy is actual cash value.

Homeowners policies also have limits on coverage for such items as jewelry, fine art or collectibles.

• For example, the standard policy will provide a maximum of $1,000 coverage for your jewelry if it is stolen. If you have lots of jewelry, fine art or collectibles, you should consider purchasing a special personal property endorsement or floater that provides the coverage you need.

8 Ways to Save Money on Your Insurance Year After Year

Now that we have given you the bad news, here are 8 ways you can pay less for your texas home insurance.

In many cases, you can get the same level of coverage for fewer dollars.

1. Take advantage of multiple policy discounts!
   1. Do you have a Houston auto insurance policy?
   2. Texas home insurance policies.
   3. If so, is it with the same insurance company that provides your homeowners insurance?
   4. Many insurance companies offer multi-policy discounts.
   5. Usually, these discounts are at least 10% and at the most 27%.
   6. some insurers apply the discounts to both the auto and the homeowners or any other Texas property insurance policy.
2. Raise Your Deductible
   1. The deductible is the amount you pay before insurance kicks in if you have a claim.
      1. For example, if you have a $250 deductible and you file a claim for $1,000 in damage to your home, you pay the first $250 and your insurer pays the balance, $750.
   2. The higher the deductible you choose, the more you pay out of your pocket.
   3. However, the higher the deductible, the less you have to pay for your policy.
   4. Depending on the insurance company, you can save between 12% and 37% if you change a deductible of $500 to $5,000.
3. Newer Homes Are Rated Better
   1. Insurance companies really like newer homes.
   2. Recently built homes equals lower premium because there is less likelyhood something will go wrong with the electrical, heating and plumbing systems.
   3. In addition, the structure itself is in better shape.
   4. Insurers offer discounts of as much as 8% to 15% if your residence is new.
4. Insure the replacement cost of the house itself not the land.
   1. There have been times when mortgage companies want us to increase the amount of insurance to be equal to the mortgage on the property.
   2. You want to insure the rebuilding cost of the house and without including the value of the land in the in the total replacement cost.
5. Don’t insure more than you own.
   1. If you have made a major purchase, you will want to increase your limits of coverage, but what if you sell something? You don’t need as much coverage.
   2. Pay particular attention to items that are covered by endorsements or added floaters to your policy, items such as jewelry and computer equipment.
6. Do not leave your house unprotected.
   1. Smoke detectors, burglar alarms and deadbolt locks are usually worth discounts of at least 2%.
   2. You can get even bigger discounts, 8% to 10%, if you install a sophisticated sprinkler system or an alarm system that rings at the police station or a security company.
   3. Before you install one, check with your insurer to find out what type of system qualifies for a discount and how much you would save on your premium if you installed the system.
7. If your dog bites, beware of lawsuits.
   1. If you have a dog or dogs, particularly if it’s a more vicious breed, you will pay more for Texas liability insurance coverage.
   2. More and more dog bite claims are being presented, which has some insurers not exactly eager to provide coverage to homeowners who have.
      1. for example, Rottweilers, Pit Bulls and Dobermans.
   3. If you are considering getting a dog, keep this in mind: If you own dogs of certain breeds, your premium will probably go up.
   4. Your insurer could decide to cancel or non-renew your policy.
   5. For that matter, if your dog is likely to bite someone – of any breed – you are risking higher premiums and cancellation
8. Keep Your Credit Score in Top Condition
   1. Insurance Companies are relying more and more on credit scoring to determine insurance premiums.
   2. They have found that people with low credit scores have almost three times the losses than people with top credit histories.
   3. Get rid of unused credit cards and pay your bills on time. It will pay off in the long run.

   I wont kid you. There is more to this insurance game than saving money. In fact, while it’s nice to lower your insurance costs, it’s probably even more important to make sure you, your loved ones and your assets are covered adequately. It’s not a pleasant thought, but insurance is about worst-case scenarios. It’s also about peace of mind, knowing that you have the worst-case scenarios covered.

   Do you have Texas insurance questions?

   We are here to help you manage your insurance protection. We promise that we will be honest with you and try to get you the best insurance coverage for your dollar. We cant always have the cheapest rates around, but I can guarantee you that we will do everything possible to make sure that you are getting all the discounts you deserve and have your insurance with one of the top insurance companies doing business today.

Uninsured nanny hit my home?

I live in Texas and my neighbors nanny drove her car into my bedroom. Luckily no one got hurt, but the damages were around $18000.
Her car insurance has her as an exclusion from the insurance so I had to file a claim against my homeowner insurance. My deductible is %1 of the property value, which is quite a lot to pay. I just wonder my neighbors are this nanny employees and since this nanny doesn’t really have anything that she can pay the damages – can I claim my damages from his homeowner insurance?
My homeowner insurance does cover these damages, but I still have to pay deductibles.

You could sue for the amount of the deductible, but not knowing Texas law, I don’t know how far you’d get. If you HO insurance covers all but the deductible, you couldn’t collect twice for the rest of the damage.

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What Is Renters Insurance

You can get auto insurance as well as renters insurance when you use State Farm insurance.  State Farm insurance is one of the leaders in the insurance industry and carries a variety of insurance policies for both your home as well as your car.  If you rent your home, you will still want to have the contents covered by getting renters insurance.  This way, in case something is stolen or lost in a fire, you do not end up losing all of the contents in your home, which can end up being costly to replace. 

When you are looking for renters insurance with a company like State Farm insurance, you can get a better break if you have other insurance policies with them.  For example, if you want to get auto insurance as well as renters insurance, you can get a discount if you use the same State Farm insurance agency.  They will give you a discount also based upon how many cars and drivers you are insuring as well.  In most cases, if you have auto insurance through State Farm insurance, you can get renters insurance for a nominal fee. 

When you have renters insurance and have some valuables in the house that are worth a great deal of money, such as collections, then you are going to want to get a special rider so that these items are covered.  In most cases, you have to provide proof that you have the items as well as an appraisal of the items in order to obtain this type of coverage.  You can have a rider that will insure your collectibles if you have renters insurance. 

You can get a quote from State Farm Insurance right online.  You can ask them for quotes for your auto insurance as well as renters insurance, bearing in mind that the more insurance policies that you have with them, the more of a discount you will receive.  It is often wise to carry all of your insurance with one carrier so that you can obtain this discount.  You can also get life insurance when you deal with a company like State Farm Insurance.  Again, you can get money off of the premium because you are using them for all of your insurance needs. 

If you rent, do not be under the impression that you will be covered by the insurance for the property that you rent in case of a fire.  Your contents will not be covered and can be very costly to replace.  You should carry renters insurance so that you can replace your contents in case of a fire or some other damage.  This can also be used in case of theft.  You should look at the deductible for the renters insurance to make sure that it is low enough so that you can replace the items without incurring a lot of cost to yourself.  When it comes to renters insurance through State Farm Insurance, you are going to want to make sure that your deductible is low so that you can replace any items lost without incurring a high cost to yourself in case of damage or theft. 

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Out of State Ownership Can be a Tax Trap

As I flip through the pages of various aircraft publications and websites, I often run across ads or articles telling potential owners of the sales and use tax benefits to owning an aircraft in an out of state company. This is also one of the first questions I am asked when I receive a call from a potential owner; how can I set up an out of state company to purchase an aircraft? My first question back is what kind of business will it be? The person at the other end says there is no “business,” it will be a company to own the aircraft.

It doesn’t seem to matter whether your passion is vehicles, boats or airplanes, somebody from one of the five states in the U.S. that have no sales tax will set up his tent along side the road and begin selling you on the idea of avoiding sales and use tax. There is nothing in the law that prevents you from establishing a corporation in one of these states; it is perfectly legal. However, owning a corporation or LLC in a state that has no sales tax does not preclude your corporation from owing sales tax in another state.

If your accountant advises you to use a corporation in a state other than the one you live in for IRS purposes, he probably knows what he is talking about. If your attorney advises you to use a corporate structure to minimize personal risk, you can be reasonably certain that he knows his area of expertise. However, if anyone leads you to believe that owning your personal property in an out of state corporation or LLC will legally avoid your sales or use tax obligation in the state where you store and use the property, you are being led down a path of financial destruction.

There are many people who believe that by registering their aircraft in the name of an Oregon, Montana, Alaska, New Hampshire or Delaware Corporation or LLC, they have legally avoided sales and use tax. The truth is they believe it because they haven’t been caught yet. Their ignorance of the law will not be a valid defense when their case has to be argued in front of the state taxing authority. The fact that they have been told by 50 people in their aviation club how “Joe and Jane” didn’t pay sales tax doesn’t change the brutal truth for John. Every person who has used an out of state corporation or address to register their property is juggling a hand grenade with the pin pulled. In fact, the longer they juggle it, the more dangerous it becomes.

The following hypothetical story is intended to explain the dangers.

In January of 2000, John Doe of San Diego, California was planning to purchase a King Air 350 to fly around the United States, Canada and Mexico for pleasure. Life had been good for John so he could afford an $8,000,000.00 aircraft. After locating several potential aircraft to purchase, John began to research the ultimate cost of ownership; fuel consumption, maintenance, hangar fees, insurance etc. In discussions with one of the salesmen, John was hit with the reality of having to pay an 8% sales tax, which on an 8 million dollar aircraft would equate to $640,000.00.

John began to pay attention to the ads about buying the aircraft in Montana or other tax advantageous state. By March he was ready to commit to the aircraft purchase. John contacted an attorney from an ad that he had saved saying that a Delaware Corporation/LLC would eliminate the sales and use tax on the purchase. The attorney took care of legally establishing the Delaware Corporation and John purchased the aircraft in the name of XYZ, Inc. with the Delaware address listed on the FAA Bill of Sale and FAA Registration. John flew via commercial airlines to Oregon to accept delivery of his new King Air 350 and immediately flew it into California where it would be based in San Diego, CA.

For the next several years John seemed to literally fly under the California sales and use tax radar. In May of 2006, John decided he wanted to re-register the aircraft to his California address. Soon after the re-registration, a letter from the Consumer Use Tax Section (CUTS) of the California State Board of Equalization (Board) arrived in his mailbox, requesting the details of the purchase. The hand grenade had all but detonated.

John’s attorney filed the tax return for the aircraft claiming that the corporation was an out of state resident and the purchase took place in Oregon. In addition, the attorney indicated the statute of limitations had expired and therefore the transaction fell outside the reach of the Board.

The Board’s response was that it didn’t matter who owned the aircraft. They forwarded a letter which outlined excerpts from the California sales and use tax code, Regulation 1620, which states in pertinent part:

“Property purchased outside of California which is brought into California is regarded as having been purchased for use in this state if the first functional use of the property is in California. When the property is first functionally used outside of California, the property will nevertheless be presumed to have been purchased for use in this state if it is brought into California within 90 days after its purchase, unless the property is used or stored outside the state of California one-half or more of the time during the six-month period immediately following its entry into this state.”

The countdown to explosion had begun.

The accountant filed a statement and documentation which claimed the aircraft was purchased for out of state use. He included flight logs and fuel receipts for numerous flights between California, Texas, Florida, Washington, New York, Arizona, Oklahoma, Kansas, Canada and Mexico during the first six months of ownership.

The Board responded that even though the property was purchased outside the state, it entered California within 90 days and did not meet the 50% out-of-state storage and/or use requirement. Therefore, it was presumed the aircraft was purchased for use inside California. The Board issued a Notice of Determination (Bill) on August 20, 2006, totaling $1,203,200.00; ($640,000.00 in tax, a $64,000.00 failure to file penalty of 10% and $499,200.00 in interest at 12% per year, by 6.5 years). Included in the Notice was a warning that the interest accrued an additional $6,400.00 each month that the tax remained unpaid.

John Doe brought his attorney into the case along with his accountant to file a Petition for Re-determination to have their case reheard. Six months later an appeals conference was held and the taxpayer’s representatives used the previously submitted documents to support that the aircraft was purchased for out of state use. They claimed that the majority of the use of the aircraft since the date of purchase had been in traveling to locations outside of California. The Board staff responded that since the aircraft entered the state the same day it was purchased, the only time that would be evaluated was the six month period following the date of first entry into California.

The representatives responded that in Regulation 1620 it states, “unless the property is used or stored outside the state of California one-half or more of the time during the six-month period immediately following its entry into this state.” They asserted that John’s flights to Texas, Florida, Washington, New York, Arizona, Oklahoma, Kansas, Canada and Mexico during the six-month test period constituted more than 70% of the total flight time traveled. It was their assertion that because the regulation states that the property must be used “or” stored more than one-half the time, the aircraft was exempt.

The Board’s staff responded to the contentions that for the last several years the Board had been interpreting that the property must be used “and” stored for more than one-half the time. Therefore, the percentage of flight hours flown inside of California versus outside of California meant nothing in this case.

The representatives responded that when you take into account the time the aircraft was in out of state locations, the actual total exceeded the 50 percent requirement in the Regulation. The Board responded that fuel receipts only prove where the aircraft was located at the moment of the purchase, and less than 15 receipts were submitted. Often there were periods of time in excess of 10 days where no receipt was provided. The reps responded that they provided two monthly hangar rental receipts from an airport in Canada for the months of February and May 2000. The staff countered that even though the taxpayer had provided the receipts for those months, it did not prove the aircraft never re-entered California during that time.

The attorney and accountant moved to the flight logs as serving as documentary evidence of the whereabouts of the aircraft during the six-month period, however the Board auditor had searched various online flight tracking sources to discover that although a majority of flights were documented in the logs, there was a material discrepancy documenting more than 20 un-logged flights.

The representatives then asserted that the period of time that has expired from the date of purchase was in excess of six years and it was impossible to recreate a document trail to establish that the taxpayers had supported their claim for an exemption. The staff simply reminded the reps that it is the taxpayer’s burden of proof, not the staff’s burden to prove the exemption was not supported.

In addition, the Board auditor determined that the Delaware Corporation was simply set up to register the aircraft to avoid the tax and recommended a 50% penalty be added for knowingly registering the aircraft outside of California with the intent to evade the tax. The Board came to this conclusion by determining there was no business conducted by the corporation, the location of the business was a Post Office Box and a forwarding agent was used for incoming mail.

On June 7, 2007, John received a Decision and Recommendation from the Board. The appeal was denied due to the aircraft not being adequately stored and use outside the state of California in excess of 50% of the time during the first six-month period immediately following the first entry into this state. In July 2007 John received a Notice of Re-determination totaling $1,607,680.00 in tax ($640,000.00), interest ($583,680.00), 10% failure to file penalty ($64,000.00) and a 50% intent to evade penalty ($320,000.00).

On April 4, 2008 John wrote a check to the Board for over $1,607,680.00, after exhausting a settlement offer with the Board and an oral hearing before the elected members of the Board of Equalization, who found the staff’s positions within the laws and regulations. After adding to the bill over $35,000.00 in legal and accounting fees that were incurred for establishing the out of state corporation, filing its returns, and for the representation before the California State Board of Equalization, the time had finally run down to zero and the grenade detonated, inhaling nearly all of John’s liquid funds. John is currently trying to sell his King Air 350 to replace the equity in his home, which he borrowed against to pay off his debt.

The sad truth is that John could have legally avoided the tax in California. He didn’t need the Delaware Corporation and he could have registered the aircraft to his California address. Instead of hiding in a bomb shelter and waiting for an explosion, all he had to do was wrap him self in the armor of a specialized program that is prepared by sales and use tax experts who understand the way the Board works from the inside.