The Texas Department of Insurance (TDI) has granted Allstate Insurance Co. permission to sell an expanded version of its basic home insurance coverage beginning in late January 2002. Additionally, Allstate says it will replace customers' comprehensive home insurance policies (called HO-B) beginning in March 2002, with the new product (named the HO-A Plus) as they come up for renewal.

This beefed-up version of the bare-bones policy (known as the HO-A) includes coverage for "sudden and accidental" water discharges such as burst water pipes. However, the new HO-A Plus caps remediation of mold damage resulting from a covered water loss at $5,000.

"This is good news for Allstate policholders in Texas," says Gary Briggs, a vice president with Allstate. "It clearly shows our desire to alleviate the Texas homeowners insurance crisis and create solutions that are equitable for our customers and for our company."

Since last summer, Texas homeowners have been slowly squeezed out of the comprehensive home insurance market due to an overwhelming increase in mold claims. The state's top three home insurers — Farmers Insurance Group, Allstate, and State Farm Insurance Co. — have all stopped selling new residential comprehensive home insurance policies in Texas.

The HO-A Plus vs. the modified HO-B

According to Allstate, the HO-A Plus will cost an average of 20 percent less than the current Allstate HO-B policy, which the insurer will drop from its product line. Also, Allstate does not intend to offer the TDI's recently modified HO-B policy to its customers. The modified HO-B, which Texas home insurers may offer as early as Jan. 1, 2002, covers removal of mold stemming from sudden and accidental discharges of water with no monetary coverage caps. The modified HO-B eliminates payments for costly remediation procedures, such as testing, beyond what is "necessary to repair or replace property that is physically damaged by water."

While the modified HO-B no longer covers the testing, treatment, containment and disposal of mold, home insurers that offer the modified HO-B must also offer homeowners the opportunity to buy extra mold remediation coverage in increments of 25 percent, 50 percent, and 100 percent of their policy limits.

In addition to coverage for sudden and accidental water discharge, Allstate's HO-A Plus provides:

• Replacement cost coverage for both personal property and the dwelling, subject to some limitations.
• Protection against perils such as sudden and accidental leakage, or overflow of water or steam from within plumbing, heating, air conditioning systems or household appliances.
• Protection against freezing of plumbing, heating, air conditioning systems or household appliances.
• Protection against building collapse; building glass breakage; falling objects.
• Coverage for foundation tear out and replacement (5 percent of the dwelling limits or $3,500, whichever is greater) resulting from sudden and accidental discharge or leakage of water from a plumbing drain system in or under the slab or the foundation of the dwelling.

Texas warns homeowners to read the fine print

In response to the changing Texas home insurance market, Insurance Commissioner Jose Montemayor reminds Texas homeowners to make sure they read their home insurance policies as they come up for renewal. "Unless endorsements are added, the HO-A policy excludes coverage for such losses as frozen pipes, water discharges, and damage from falling tree limbs," warns Montemayor. "The unendorsed HO-A also pays only actual cash value, not replacement cost, for damaged household contents and damaged building components, such as roof coverings."

You can learn more about homeowners insurance in Texas by requesting a free brochure, "Homeowners Insurance: A Guide for Texas Consumers," from TDI's publication order line at (800) 599-7467.