What Does a Standard Texas Homeowners Policy Cover?
A standard Texas homeowners policy (HO-3) covers your dwelling, other structures, personal property, additional living expenses, personal liability, and medical payments to others. It uses open-peril coverage for the structure, meaning everything is covered unless specifically excluded. Key exclusions include flooding, foundation movement, earthquakes, normal wear and tear, and pest damage.
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Understanding this coverage is an important part of choosing the right Texas home insurance policy for your property.
The “I’m Fully Covered” Trap
- Your HO-3 covers the dwelling on open perils but defaults personal property to 16 named perils only—a gap most homeowners never realize exists
- Flood, foundation movement, and mold above $5,000–$10,000 are all excluded—3 of the costliest damage types in Texas come entirely out of pocket
- Many Texas policies default personal property to actual cash value, which means a 5-year-old $2,000 couch might only pay $800 at claim time
- Coverage D only triggers for covered perils, so displacement from flooding (excluded) gets zero reimbursement even though wind damage (covered) would
The Real Numbers
- Texas homeowners pay roughly $4,100–$4,900 per year, making it the 5th most expensive state for homeowners insurance nationwide
- A 2% wind/hail deductible on a $400,000 home equals $8,000 out of pocket—separate from your $1,000–$2,500 all-perils deductible
- Upgrading personal property from ACV to replacement cost adds only 10–15% to your premium but closes a 40–60% payout gap on older items
- Increasing liability from the $100,000 default to $300,000 typically costs just $20–$40 per year—trivial for the protection it provides
The Annual Review Checklist
- Verify your dwelling limit reflects current rebuild cost—Texas construction costs have risen 15–25% since 2020, and underinsuring triggers coinsurance penalties
- Check whether your roof is settled at replacement cost or ACV—carriers silently switch roofs over 10–15 years to depreciated settlements
- Review endorsement changes at every renewal for cosmetic damage exclusions and water damage sublimits that quietly reduce your effective coverage
- Add water backup ($40–$75/year) and extended replacement cost ($50–$150/year) endorsements if your policy lacks them—both cover common Texas claims
The Canopy Advantage
- Every homeowners quote is compared across 18+ carriers, ensuring your HO-3 has the broadest endorsements at the most competitive premium available
- EJ Nadolny brings 15+ years of Texas insurance expertise, spotting silent coverage restrictions that generalist agents and online platforms routinely miss
- Your dedicated account manager reviews your declarations page at every renewal—flagging limit changes, endorsement additions, and deductible increases proactively
- Canopy’s 99.1% client retention rate exists because clients who understand their coverage and pay less for it have no reason to leave
Does a Texas HO-3 policy cover roof damage from hail?
Yes, hail is a covered peril under HO-3 open-peril dwelling coverage. However, many carriers apply actual cash value settlement on roofs older than 10–15 years, reducing your payout by depreciation.
Is flood damage included in a standard Texas homeowners policy?
No. Flooding from surface water, storm surge, or overflowing bodies of water is always excluded. You need a separate flood policy through the NFIP or a private flood insurer.
What is the difference between replacement cost and actual cash value?
Replacement cost pays to buy a new equivalent item at current prices. Actual cash value subtracts depreciation, so a five-year-old $2,000 couch might only pay out $800 under ACV.
What Are the Six Coverage Sections in a Texas HO-3?
A Texas HO-3 policy bundles six distinct coverage sections into one contract. Each section protects a different category of risk, from the physical structure of your home to liability for injuries on your property. Here is what each section covers and the typical limits you can expect.
Coverage A — Dwelling
- What it protects: The physical structure of your home including walls, roof, foundation, attached garage, built-in appliances, and permanently installed fixtures against all perils except those specifically excluded
- Typical limit: Set at full replacement cost of the home, which is the amount needed to rebuild from the ground up at current construction costs, not market value or purchase price
- Texas consideration: Construction costs in Texas have risen 15–25% since 2020, so homeowners who have not updated their dwelling limit recently may be significantly underinsured at claim time
Coverage B — Other Structures
- What it protects: Detached structures on your property such as fences, detached garages, storage sheds, gazebos, guest houses, and in-ground pools that are not physically connected to the main dwelling
- Typical limit: 10% of your Coverage A amount, so a $400,000 dwelling policy provides $40,000 for other structures, which can be increased with an endorsement
- Texas consideration: Fence replacement is one of the most common claims after Texas windstorms, with a full perimeter fence on a typical lot costing $8,000–$15,000 to replace
Coverage C — Personal Property
- What it protects: Your belongings including furniture, clothing, electronics, appliances, sporting equipment, and most other personal items when damaged by one of 16 named perils
- Typical limit: 50–70% of Coverage A, giving you $200,000–$280,000 on a $400,000 dwelling policy, though sub-limits cap jewelry at $1,500–$2,500 and firearms at $2,500
- Texas consideration: Many Texas policies default to actual cash value for personal property, so upgrading to replacement cost coverage (typically a 10–15% premium increase) closes one of the biggest payout gaps
Coverage D — Loss of Use
- What it protects: Additional living expenses when a covered loss makes your home uninhabitable, including hotel stays, temporary rental housing, restaurant meals above normal budget, and storage costs
- Typical limit: 20–30% of Coverage A, providing $80,000–$120,000 on a $400,000 policy, which can be consumed within 8–12 months at Texas metro temporary housing rates
- Texas consideration: Coverage D only triggers for covered perils, so if you are displaced by flooding (excluded under homeowners) rather than wind damage, this coverage does not apply
How Do Liability and Medical Payments Work?
Coverages E and F handle the people side of homeownership. They protect you financially when someone is injured on your property or when you accidentally damage someone else's belongings. These coverages are often overlooked, but they can prevent a single incident from wiping out your savings.
Coverage E — Personal Liability
- What it covers: Legal defense costs and any judgment or settlement when someone is injured on your property or you accidentally cause damage to someone else's property, up to your policy limit
- Standard vs. recommended limit: The default is $100,000, but most insurance professionals recommend $300,000–$500,000 because increasing from $100K to $300K typically costs only $20–$40 per year
- Common claims: Slip-and-fall injuries, dog bites, and fallen tree damage are the most frequent liability claims, with Texas consistently ranking in the top five states for dog bite claim costs exceeding $50,000
- Umbrella option: Homeowners with significant assets should consider a personal umbrella policy that adds $1 million or more in additional liability coverage for roughly $200–$400 per year
Coverage F — Medical Payments to Others
- What it covers: Minor medical expenses when a guest is injured on your property, paid regardless of fault, designed to handle small injuries without triggering a lawsuit
- Standard limit: $1,000–$5,000 per person, enough to cover an ER visit or minor treatment when a neighbor trips on your front steps
- How it differs from liability: Coverage F is no-fault and pays directly without a liability determination, keeping small incidents from escalating into formal claims against your Coverage E
All Six Coverages at a Glance
This comparison table summarizes what each section covers and the standard limits you will find on most Texas HO-3 policies. Use it as a quick reference when reviewing your declarations page.
| Coverage | What It Protects | Standard Limit |
|---|---|---|
| A — Dwelling | Home structure, roof, attached garage, built-in fixtures | Full replacement cost |
| B — Other Structures | Fences, detached garages, sheds, pools | 10% of Coverage A |
| C — Personal Property | Furniture, electronics, clothing, belongings | 50–70% of Coverage A |
| D — Loss of Use | Temporary housing and extra living expenses | 20–30% of Coverage A |
| E — Liability | Injury and property damage lawsuits, legal defense | $100K–$500K |
| F — Medical Payments | Minor guest injuries on no-fault basis | $1K–$5K per person |
What Does a Texas Homeowners Policy Exclude?
The exclusions are where financial surprises hide. Your HO-3 covers a wide range of perils, but several major risks are carved out entirely. Knowing these exclusions upfront lets you decide which gaps to fill with endorsements or separate policies.
Major Exclusions
- Flooding: Surface water, storm surge, and overflow from any body of water are never covered under a standard homeowners policy and require a separate flood insurance policy through the NFIP or a private insurer
- Foundation movement and settling: Cracking and shifting from normal soil movement is excluded, which is especially relevant in Texas where expansive clay soils cause widespread foundation issues that homeowners often assume are covered
- Earthquake and earth movement: All ground movement including sinkholes and subsidence is excluded, though earthquake endorsements are available in some markets
- Normal wear and tear: Gradual deterioration is a maintenance responsibility, not an insurable event, so a 25-year-old roof that fails from age is not a covered claim
Limited or Capped Coverages
- Mold: Most Texas policies cap mold remediation at $5,000–$10,000, but actual remediation after a major water loss can exceed $50,000, and Texas law requires insurers to offer mold endorsements at 25%, 50%, or 100% of Coverage A
- Pest and insect damage: Termites, rodents, and other pests are fully excluded because they are considered a preventable maintenance issue rather than a sudden accidental loss
- Business property: Most policies cap on-premises business equipment at $2,500, so remote workers with significant home office setups need a home business endorsement or separate commercial policy
How Do Wind and Hail Deductibles Work in Texas?
Wind and hail deductibles in Texas are percentage-based, not flat-dollar amounts. This means your out-of-pocket cost scales with your dwelling coverage, and many homeowners do not realize how much they owe until after a storm hits.
How Percentage Deductibles Are Calculated
- 2% is now standard: Most Texas carriers have moved to a 2% wind and hail deductible as the default, meaning a homeowner with $400,000 in dwelling coverage pays the first $8,000 of any wind or hail claim out of pocket
- Range of options: Wind and hail deductibles typically range from 1% to 5% of dwelling coverage, though 1% options have become increasingly rare in hail-prone areas of North and Central Texas
- Separate from AOP: Your wind and hail deductible is separate from your all-other-perils (AOP) deductible, which is usually a flat dollar amount like $1,000 or $2,500
| Dwelling Coverage | 1% Deductible | 2% Deductible | 3% Deductible |
|---|---|---|---|
| $250,000 | $2,500 | $5,000 | $7,500 |
| $400,000 | $4,000 | $8,000 | $12,000 |
| $600,000 | $6,000 | $12,000 | $18,000 |
Which Endorsements Are Worth Adding in Texas?
Endorsements customize your base policy to fill specific gaps. In Texas, where severe weather and unique property risks create coverage shortfalls, the right endorsements can save you thousands at claim time. Here are the most valuable options.
High-Value Endorsements
- Replacement cost on personal property: Upgrades Coverage C from actual cash value to replacement cost for an additional 10–15% of your premium, closing one of the largest potential payout gaps on a major loss
- Water backup and sump overflow: Covers damage from sewer or drain backup, which is excluded from standard policies, at a cost of roughly $40–$75 per year for $10,000–$25,000 in coverage
- Extended replacement cost: Adds 25–50% above your dwelling limit to account for construction cost spikes after widespread disasters when contractor demand surges, costing $50–$150 per year
- Scheduled personal property: Provides full coverage for high-value items like jewelry, art, firearms, and collections that exceed standard sub-limits, with cost based on appraised item value
Additional Endorsements to Consider
- Equipment breakdown: Covers mechanical and electrical failure of HVAC systems, water heaters, and electrical panels for roughly $25–$50 per year, filling a gap that standard policies do not address
- Mold coverage increase: Texas insurers must offer mold endorsements at 25%, 50%, or 100% of Coverage A limits, which is critical given that standard mold caps of $5,000–$10,000 rarely cover real remediation costs
- Service line coverage: Protects underground utility lines running to your home from damage, deterioration, or collapse, typically adding $30–$60 per year to your premium
How Does an HO-3 Differ from an HO-A Policy?
Texas uses two main policy forms for homeowners. The HO-3 is the standard and most common form nationwide, while the HO-A is a more restrictive form often issued for older or higher-risk properties. Understanding the difference matters because an HO-A provides significantly less protection.
Key Differences
- Peril coverage: HO-3 covers the dwelling on an open-peril basis (everything except what is excluded), while HO-A only covers named perils that are specifically listed in the policy, leaving gaps for any unlisted cause of damage
- Claim settlement: HO-3 policies typically settle dwelling claims at replacement cost, while HO-A policies use actual cash value, subtracting depreciation and potentially reducing your payout by thousands of dollars on older components
- Wind-driven rain: HO-A policies cover wind and hail damage but do not cover wind-driven rain entering through openings, which is a common damage pattern during Texas thunderstorms and hurricanes
- Who gets which: Most Texas homeowners qualify for HO-3 coverage, but carriers may issue HO-A policies for homes with older roofs, prior claims history, or other underwriting concerns that increase risk
The Bottom Line
A standard Texas HO-3 policy covers your home's structure on an open-peril basis plus five additional coverage sections for belongings, living expenses, liability, and medical payments. But the exclusions for flooding, foundation movement, and mold limits are where real financial risk hides. Know exactly what your policy covers, understand your wind and hail deductible amount, and add endorsements where the gaps could hurt you most. Review your coverage limits at every annual renewal because construction costs, personal property values, and liability exposure all shift over time.
Next step: Get your free Texas homeowners quote and see how your current coverage compares.
Frequently Asked Questions
What perils does an HO-3 policy cover for the dwelling?
An HO-3 covers the dwelling on an open-peril basis, meaning it protects against all causes of loss except those specifically excluded. Common exclusions include flood, earthquake, foundation settling, normal wear and tear, and pest damage. This is broader than named-peril policies like the HO-A.
How much does homeowners insurance cost in Texas?
Texas homeowners pay an average of $4,100–$4,900 per year for a standard HO-3 policy with $300,000 in dwelling coverage, making Texas the fifth most expensive state for homeowners insurance. Premiums have risen more than 55% since 2019 due to severe weather and construction cost increases.
Does my Texas homeowners policy cover foundation problems?
No. Foundation movement, settling, and cracking from normal soil movement are excluded from standard homeowners policies. This is especially frustrating in Texas where expansive clay soils cause widespread foundation issues. Foundation repair typically costs $5,000–$15,000 or more and must be paid out of pocket.
What is a wind and hail deductible in Texas?
A wind and hail deductible is a percentage of your dwelling coverage, not a flat dollar amount. Most Texas carriers now default to 2%, meaning a homeowner with $400,000 in dwelling coverage pays the first $8,000 of any wind or hail claim before insurance kicks in.
Does my policy cover my belongings at replacement cost?
Not automatically. Many Texas policies default to actual cash value for personal property (Coverage C), which subtracts depreciation from your payout. You can upgrade to replacement cost coverage through an endorsement that typically adds 10–15% to your premium.
Am I covered if a tree falls on my house during a storm?
Yes, if the tree falls due to a covered peril like wind or the weight of ice. Your dwelling coverage pays for structural damage, and most policies include $500–$1,000 for debris removal. If the tree fell due to decay or neglect, the claim may be denied.
Should I get an umbrella policy in addition to my homeowners coverage?
If you have significant assets, yes. A personal umbrella policy adds $1 million or more in liability protection on top of your homeowners and auto coverage for roughly $200–$400 per year. It is one of the most cost-effective ways to protect your financial future.
How do I know if I need a separate flood policy?
If your property is in a FEMA-designated flood zone, your mortgage lender will require flood insurance. Even outside designated zones, roughly 25% of flood claims come from low-to-moderate risk areas. Consider your proximity to waterways and local drainage patterns when deciding.
Resources Used
- Texas Department of Insurance — Home Insurance Consumer Guide
- Insurance Information Institute — What Is Covered by Standard Homeowners Insurance?
- NerdWallet — Average Homeowners Insurance Cost (2026)
- Texas Department of Insurance — Mold and Fungi Endorsements
- ValuePenguin — What Is an HO-3 Homeowners Insurance Policy?
- Texas Department of Insurance — Texas Homeowners Insurance Market Overview
- United Policyholders — How to Understand a Wind/Hail Deductible
- Insurance.com — Does Homeowners Insurance Cover Mold?
EJ Nadolny is the founder and principal agent of Canopy Insurance Texas, an independent insurance agency based in San Antonio. With deep expertise in home, auto, commercial, and specialty insurance lines, EJ leads a team that represents 18+ carriers across Texas. His approach focuses on finding the right coverage at the right price by shopping the market on behalf of every client — not pushing a single carrier’s products.
