By SPJ Adjusting Services | Insurance Appraisals
Texas Insurance Policy Sublimits: 7 Critical Facts Every Policyholder Must Know
The fact is, most people from Texas do not read their insurance contracts until a problem occurs, forcing them to do so. But once a claim is filed, most are surprised to find that the conditions set by the policy include provisions that significantly impact how much coverage they are entitled to collect. Perhaps the most commonly misunderstood aspect of a typical Texas insurance policy is the presence of a sublimit.
In our practice at SPJ Adjusting, we assist policyholders in Texas, from the Texas Panhandle to the Gulf Coast, in making sense of confusing policy language, including but not limited to, sublimit coverage involving mold, water damage, electronics, jewelry, foundation, and many others. It is the distinction between a fair claims result and a claims result short by thousands of dollars.
This article defines ‘sublimit’ clearly, explains how it interacts with deductibles, and highlights problems which exist with claims in Texas that we commonly see.
Sublimit Question: What is a sublimit in a Texas insurance policy?
A sub-limit refers to a smaller maximum that is imposed on certain types of claims, but you could have a substantially larger overall policy maximum.
“Suppose your policy provides:”
$200,000 dwelling coverage
Personal property coverage of $100,000
You presume that your coverage is set at these figures.
“However, sub-limits are mini-limits within the overall coverage”
Texas Example
Texas
The homeowner in Texas might have coverage of $100,000 on his or her personal property but
Only US$2,500 for electronics
“Only $5,000 for mold
Jewelry for only $1,500
Water backup for only $1,000.
This means that even when you have a loss of say $10,000 worth of electronics, the most you can be paid is $2,500.
Sublimits are very common in Texas owing to the state’s peculiar risks to:
Hurricanes
Hail
Foundation Shifting
Mold development because of humidity
Flooding
Rain that is brought by the wind
Such problems tend to activate limited coverage buckets with sub-limits.
Sublimit vs. Deductible: Not the Same Thing
The deductible refers to the amount that the insured has to pay before the insurance coverage takes effect.
Sub-limit is the limitation on the amount that the insurance company is supposed to pay for a certain type of damage.
They interact, and the order in which they are used can significantly impact your pay-out.
How Sub-limits & Deductibles Interact with Texas Law
First,
In Dallas, Texas, the insurers’ computation of claims is not always similar. In some cases, it uses the deductible, which is the better approach. In other cases, it uses the sublimit, thus resulting in a significantly reduced amount.
SPJ is making adjustments to reviews on a weekly basis in Texas, and we find regularly that the insurers are relying on a calculation that gives them, not the policyholder, advantage.
So, let’s list the differences.
Method 1 (Traditional Texas Method): Deductible First
This has been the most common, as well as more accepted, way.
Example Loss in Texas:
“Total Damage” = $
Mold Sublimit: $3
Deductible:
Step 1: Pay the deductible. → $6,000 – $1,000 = $5,
Step 2: Apply sublimit → Payout capped at $3,000
Pay-out: $3,
In this case, the deductible is said to be “absorbed” by that amount of the loss which exceeded the sublimit.
In Method 2, the order of priority is not as inherently favorable
In Texas, some of the endorsements, especially those involving mold and water, pay the sublimit before the deductible is paid.
Sharing the same loss:
Step 1: Aggregate coverage >$10,
Step 2: Deduct deductible amount -> $3,000 – $1,000 = $
Payout = $400 x
You forfeit an additional $1,000 on account of the order of calculations.
Real-World Texas Example: Mold Following a Plumbing Leak
Often, we find ourselves doing this throughout the state: Austin, Houston, Dallas, San Antonio, Fort Worth, even the Gulf Coast-Coast Corpus Christi, Beaumont.
Loss:
$10,500 mold remed
£2,700 water damage
Mold Sub-limit: Five Thousand
Deductible:
Total loss: $13,
If deductible is applied first (favorable):
13,200 – 1,000 =
Sublimit applies → $5,000 paid for mold
Water damage paid in full → $2,70
The total amount paid: $
If sub-limit is considered first (unfavorable cases),
Mold, capped at $5,000
Water damage: $2,
Subtotal: $
Deductible paid → $6,700 paid
“Total Payout”: $
Difference of $1,000 – variable.
^
This is exactly what SPJ Adjusting is capable of solving with regard to appraisal, negotiation, and expert umpiring.
The Importance of Sub-Limits in Texas Laws
Texas, because of its particular climate as well as topography, is especially significant with regard to sublimits:
- Hurricanes & Wind Storms
Insurers in the Gulf Coast tend to set special sublimits on:
Rain assisted by wind
Named storms
Percentage-based windstorm deductibles
Debris Removal - Hail Claims
Hail deductibles a r e generally common in Dallas-Ft. Worth, Austin, San Antonio, Abilene, Lubbock, etc.
However, it is essential
- Foundation Claims
Most of Texas has large clay soils that can swell or shrink significantly. Most policies have restrictive coverage limits on foundations, even excluding them altogether.
- Mold & Humidity
The humidity in Texas is high, such that mold grows rapidly. The mold sub-limits in Texas are some of the toughest in the country. - Backup & Drainage Problem
The backup endorsements for coverage of water damage are virtually always subject to sublimits, which are
Knowing these limitations is significant in Texas, particularly because a significant number of claims have multiple causes, with insurance carriers seeking to fit aloss into categories with small sub-limits.
SPJ Adjusting takes a stance against the misapplication of such a limitation by the insurance
General Problems that Texas Policyholders Experience Regarding Sublimit
SPJ Adjusting is regularly faced with challenges such as:
Insurers applying sub limits to the incorrect part of the loss
Deductibles misapplied following the sub-limit
Mold loss costs are broken down into several categories in order to reduce compensation
Inaccuracies in classification of wind, flood, vs. wind-driven rain
The basis for this discrepancy can, assuming certain conditions are met, be explained by a distinction
Insurers applying sub limits before determination of cause of loss
Such discrepancies result in losing thousands of dollars per year to Texans.
How Texans Can Protect Themselves From Sublimit Surprises
- Annual review of your policy
Especially before hurricane season or after a switch in carriers. - Demand explanation in writing
Ask your agent or insurer:
Which categories have sub-limits?
How do deductibles apply to such sub-limits?
Are there any percentage deductibles? - Document Your Home Before a Loss
Photographs, images, and videos are evidence of the worth of such commonly sublimited articles such as electronics, jewelry, equipment, and more. - Never rely on a carrier’s explanation following a loss
SPJ Adjusting frequently identifies errors in mathematical calculations, misinterpretations, that policyholders themselves would never have been able to identify on their own
5. Take advantage of the appraisal process
Texas has a policy that has an appraisal clause aimed at ensuring disputes over valuation are resolved quickly, without going to court.
SPJ Adjusting provides:
Appraisal Representation for Insureds
Services of certified umpires when the process reaches an impasse
Such instruments are most useful in disputes involving a sublimit.
SPJ Adjusting: Texas Leaders in Sub-Limits, Deductibles, and Claim Dispute
In Amarillo to the Gulf Coast, West Texas to Hill Country, SPJ Adjusting assists Texans in securing the settlements they deserve.
We specialize in:
Insurance Appraisals Umpire Services Claims concerning roof and storm damage Claims involving a hurricane and hail Water and mold loss disputes Analysis of misapplied sublimits Deductible rec Undervaluation of If your Texas insurance claim appears to be short-paid, or if you believe that a sub-limit has been improperly used, SPJ Adjusting can assist.
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