Property Insurance in Texas

The State of Texas does a statistical study. From the results of the study the State of Texas derives the Benchmark Rate. If a company were to insure all the property in Austin, charging the Benchmark Rate, the company would make a reasonable profit ---- a fair arrangement.

The companies aren't dumb. The companies do their own statistical studies and have determined that certain property is unlikely to burn down. Wouldn't it be nice to insure only property that will not burn ---- big profit.

Generally speaking, the major carriers employ this cherry-picking strategy. Did your insurance agent ask questions like - do you smoke? - how long have you owned the property? - do you live in your house? etc... If you are in the no-burn category (about 20% of Austin), you get insurance at the State of Texas Benchmark Rate ---- you should get a large discount.

If you're part of the other 80%, your agent will place coverage with one of the surplus carriers ---- you pay more.

Surplus carriers are generally small companies that charge high rates (like 10 time as much). Most major carriers have small-company subsidiaries. You probably won't know the difference. The small-company-name will be something like Major-Carrier-Name with the word Lloyds attached at the end. ---- if you get stuck with a Lloyds company be sure to ask for a pass-through the parent company.

Lots of Competition?

If you look through the Yellow Pages it appears that there are thousands of insurance agents/companies, but, the reality is that there are only-a-handful of major carriers/underwriters operating in the Austin area, and they are all competing for the 20% no-burn customers.

Fire Only

I recommend Fire and Lightning coverage - forget all the other stuff. Fire coverage is cheap, like for a $150,000 worth of fire coverage you pay $100.00, but a homeowners policy with all the frills is $1,000.00.

Benchmark Rates for Austin

Rates per $1,000 of coverage for Fire and Lightning (Only) for 1996:

  • Frame $2.16
  • Asbestos $1.4475
  • Brick $0.5325
  • Brick Veneer $0.645

    • Example: A $150,000 Brick Veneer home would be less than $100 ( $150,000 * $.0645 / 1000 = $96.75).

    To get the other State of Texas benchmarks rates (like for extended coverage), call the State Board of Insurance at 322-2236 ---- it was a major battle to squeeze these numbers out of them - it helps if you speak Spanish.