Texas’ Property Insurer of Last Resort Serves Many in Harvey’s Path

Many of the homeowners and businesses in the path of Hurricane Harvey get hurricane protection for their properties from the Texas Windstorm Insurance Association (TWIA) instead of from either a traditional homeowners or business policy.

Created by the state Legislature in the 1970s, TWIA is a privately funded property insurer that provides windstorm and hail coverage to Texas homeowners and businesses in numerous coastal counties.

Homeowners and businesses purchase TWIA policies from their insurance professionals separate and apart from their homeowners and business policies so as to be covered for two specific events—either wind or hail-caused damage to their property.

Flood coverage for homeowners and businesses must be acquired separately from either FEMA’s National Flood Insurance Program (NFIP) or a private flood insurer.

TWIA policies have hurricane deductibles, which are usually equal to anywhere from 1 to 5 percent of a property’s insured value.  For instance, a TWIA policyholder who has a home with an insured value of $150,000, and a hurricane deductible of 5 percent, would have a $7,500 deductible. ($7,500 is 5 percent of $150,000.)  In this instance, the TWIA policy would cover wind-caused property damages above and beyond the $7,500 deductible. So if wind damage was $20,000, TWIA coverage would be $12,000 less $7,500, or $12,500.

TWIA claims are paid primarily from two revenue sources: the premiums TWIA collects from its policyholders and the money TWIA can access from its Catastrophe Reserve Trust Fund (CRTF).  The CRTF consists of funds TWIA has accumulated over time.  If TWIA needs additional money to pay claims, it is also authorized to use the money every Texas-licensed property insurer pays to TWIA in the form of annual assessments. It has a variety of other funding mechanisms that give it the ability to handle up to $4.9 billion in claims, which right now seems to be plenty for this particular storm.

TWIA issues policies in 14  coastal counties as well as portions of Harris County. TWIA writes the wind/hail for about 60% of the policies in that region, the rest being covered by private companies.

If you are insured by TWIA, you’d know it. It is an insurer of “last resort.” At least two traditional insurers would have to have refused to cover your property for wind risk, and your agent would have notified you of that fact and sent you to TWIA to seek coverage.

If you are a TWIA policyholder, you can learn more about filing a claim at the organization’s website or by calling (24 hours a day, seven days a week) (800) 788-8247.

Updated at 3:50 p.m. Eastern 8/26 to show the percentage of policies held by TWIA in the coastal region.

Updated at 5 p.m. Eastern 8/26 to give more detail on TWIA’s funding mechanisms and how people can know whether TWIA is their insurer.

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