Ed 
The homeowner policy sold by the Texas FAIR Plan covers exactly ten causes of loss. Fire, lightning, smoke, wind and hail, explosion, aircraft, vehicles, theft, vandalism, and riot. That is the entire list, and it comes straight off the Texas Department of Insurance overview of the FAIR Plan published in June 2026. If your house gets wrecked by something nobody wrote on that list, you own it (and yes, that includes a lot of things you would assume are covered).
That is a named peril policy. An open peril policy runs the other direction. TDI puts it in one sentence on its consumer tips page: “All-risk policies cover any event that the policy doesn’t specifically exclude.” Named peril starts at zero and adds things. Open peril starts at everything and subtracts things. Same house, same premium bill showing up every month, completely different answer when the adjuster comes out.
So here is what I see in the market. Buyers shop insurance the way they shop gas stations, by the number on the sign, and the quote that comes back $600 cheaper wins. Nobody asks which form it is. I have been doing this since 2009 and I can count on one hand the number of buyers who have asked me what policy form they were being sold, and honestly I did not ask either for the first several years I was in the business. Lets fix that, because the difference is not small and it is not subtle.
Texas has four policy form types and TDI puts them in a table
Texas does not use the national forms the way most states do. Before 2003, companies here had to use either the Texas promulgated forms or the ISO forms. Then SB 14 passed in the 78th Legislature and, in TDI’s words, “insurers began filing and using their own forms in 2003 under SB 14 (78th Legislature), although some still use the promulgated forms.”
Every form still has to be approved by TDI before anyone can sell it. And TDI sorts all of them into four buckets, which it lays out in its own document, Texas Homeowners Policies. Those four buckets are HO-A, HO-A+ (you will also see it written HO-A Plus), HO-B, and HO-C. They line up against the national ISO forms as HO 1, HO 2, HO 3, and HO 5.
Here is what each one actually does. Every row below is built from TDI’s descriptions of the four form types in that document, and I want to flag TDI’s own caveat before you read it: the agency notes that perils or exclusions vary by policy on every single row. This is what is typical, not what is guaranteed. Your declarations page is the only thing that governs your house.
| Cause of loss | HO-A (ISO HO 1) |
HO-A+ (ISO HO 2) |
HO-B (ISO HO 3) |
HO-C (ISO HO 5) |
|---|---|---|---|---|
| Fire, lightning, smoke | Covered | Covered | Covered | Covered |
| Windstorm, hurricane, hail | Covered | Covered | Covered | Covered |
| Explosion, aircraft, vehicles | Covered | Covered | Covered | Covered |
| Theft, vandalism, riot | Covered | Covered | Covered | Covered |
| Falling objects | Not typically | Covered | Covered | Covered |
| Weight of ice, sleet, or snow | Not typically | Covered | Covered | Covered |
| Freezing pipes | Not typically | Covered | Covered | Covered |
| Sudden and accidental water discharge | Not typically | Some coverage | Some coverage | Some coverage |
| Damage to the house from a cause nobody listed | Not covered | Not covered | Covered unless excluded | Covered unless excluded |
| Damage to your belongings from a cause nobody listed | Not covered | Not covered | Not covered | Covered unless excluded |
Source: built from the four form descriptions in TDI, Texas Homeowners Policies. TDI’s caveat applies to every row.
The last two rows are the entire argument
Ignore the top of the table for a second. The first eight rows are a rounding error, most policies pick up most of that stuff one way or another. The two rows in bold at the bottom are where the money is.
A named peril policy is a list of things that have already gone wrong for somebody. Somebody’s house burned, so fire is on the list. Somebody’s house got hit by hail, so hail is on the list. It is a catalog of the past. Taleb’s whole point in The Black Swan is that the thing that takes you out is never the item on the list, it is the one nobody thought to write down. A named peril policy is that book’s worst-case scenario printed on letterhead and mailed to you every year.
Open peril flips the burden of proof. On an HO-B or HO-C, the insurance company does not get to ask you which listed peril caused the damage. It has to point at a specific exclusion in the contract and show you the damage falls inside it. That is a genuinely different fight, right. And it is the reason the HO-B is the form your lender is going to want to see, which we will get to in a minute.
Notice the HO-B has one gap. Your house is open peril, your stuff is not. So the couch and the laptop and the bikes in the garage are still on a list. The HO-C closes that gap and covers both sides on an open peril basis. That is the top of the market and it costs accordingly.
What your lender will actually accept
This is the part that decides the question for most people, and almost nobody checks it before they bind coverage.
If you are getting a conventional loan, Fannie Mae’s Selling Guide B7-3-02 says property insurance on a one to four unit property “should be written on a ‘Special’ coverage form or equivalent.” Special form is the open peril form. In Texas terms that is your HO-B or better. Fannie Mae also sets a floor on perils (fire or lightning, explosion, windstorm including named storms, hail, smoke, aircraft, vehicles, riot or civil commotion), requires the policy to pay on a replacement cost basis with the exception of roofs, and caps the deductible at 5 percent of the coverage amount, including a separate windstorm deductible.
TDI says the same thing in plainer language: “If you owe money on your house, your lender will probably require you to have an all-risk policy.”
So if you have a mortgage, the cheap named peril quote may not be a choice you are allowed to make. Which is fine. But I would rather you find that out in week one than the afternoon before funding, when your lender kicks the binder back and your insurance agent is on vacation.
Cheaper is real. False economy is also real.
Named peril policies cost less. TDI says so directly, and I am not going to pretend otherwise. “Named perils policies are cheaper, but they might not provide all the coverage you need.”
And I get the pull. Nobody goes shopping for a narrower form because they think it is better, they do it because the renewal notice made them flinch (there are real reasons behind those notices, and I took that apart separately in why Texas home insurance did not get expensive by accident). But cheaper on the declarations page and cheaper after a loss are two very different things.
But there is a second dial that usually gets turned down at the same time, and it does more damage than the peril list does. That is loss settlement. Replacement cost pays current prices with no deduction for depreciation. Actual cash value pays replacement cost minus depreciation. TDI runs the numbers on a roof, using a $200,000 home with a $4,000 deductible and a $10,000 roof replacement:
| Roof age at time of loss | Replacement cost policy pays | Actual cash value policy pays |
|---|---|---|
| 5 years | $6,000 | $4,500 |
| 10 years | $6,000 | $3,000 |
| 20 years | $6,000 | $0 |
Source: TDI, Home policies: Replacement cost or actual cash value?
Twenty year roof, actual cash value, ten thousand dollar loss, zero dollar check. That is not a coverage gap anybody would notice on a quote sheet right. Go find out how old your roof is. This is Central Texas, we get hail, and a roof here does not usually make it to twenty without an argument anyway.
So lets put the two dials together, because in the real world they move together. The FAIR Plan HO-A, the one from the top of this article, defaults to actual cash value on the dwelling. You can buy replacement cost back as an endorsement for extra premium, but the base policy is depreciated. Its deductible options are 1 percent or 2 percent rather than a flat dollar amount, and if you have had four or more claims in the preceding three years (glass claims do not count) you do not even qualify for the 1 percent option. TDI notes that a percentage deductible is figured on the policy limits, so 2 percent of a $400,000 dwelling limit is $8,000 out of your pocket before the company pays anything.
And notice that dwelling limit is not your purchase price. Travis County’s median sold price in July 2026 was $525,000 (that is our own market data, not an estimate off a national site), but a big chunk of that number is dirt, and dirt does not burn. Coverage A is what it costs to rebuild the structure, which is why a house that sold for $525,000 can carry a dwelling limit well below that and still be correctly insured.
TDI also warns that insurers may move a roof from replacement cost to actual cash value as it ages, and that a roof in poor enough condition might not be covered at all. That change can show up at renewal, on a policy you have had for years, in an envelope you did not open carefully. Ask about it every year.
Find out during the option period, not after
Here is the practical move, and it is the whole reason I wrote this.
The Texas option period is not just for the inspection. It is your window to find out whether the house is insurable on terms you can live with. Call an agent the same day you go under contract and ask for a quote on an open peril form with replacement cost on the dwelling. What comes back tells you a lot about the house, sometimes more than the inspection does. A property with a claims history, a 22 year old roof, or a foundation file can come back priced strangely, written on a restricted form, or declined outright.
And if it gets declined enough, you land at the FAIR Plan, which is not a small thing to end up in. You have to be declined by at least two licensed Texas carriers to qualify, the policy runs one year at a time, and you have to reapply in the regular market every two years. Statewide there were 124,445 FAIR Plan policies in force as of March 31, 2026, and Travis County is not in the top ten counties for it. So this is uncommon here. Uncommon is not the same as impossible, and the time to learn which one you are is while you still have an unrestricted right to walk.
Ok, so what do you actually ask? Four questions, and you can ask them on the phone in under five minutes:
- Which form is this, HO-A, HO-A+, HO-B, or HO-C? If the agent answers with a company product name, ask whether the dwelling is written on an open peril or named peril basis.
- Is the dwelling settled at replacement cost or actual cash value?
- Is the roof settled the same way as the rest of the house, and does that change as the roof ages?
- What is the wind and hail deductible, and is it different from the deductible on everything else?
TDI’s advice on this is the most useful sentence on its entire site, and it is one line long: “Read the policy’s list of ‘Perils Insured Against’ to know exactly what the policy covers.” That list is in your policy. It has been sitting in a drawer or an email attachment this whole time.
One more thing that catches people
None of these four forms covers flood. Not the HO-A, not the HO-C, not any of them. Flood is a separate policy, and in Flash Flood Alley that matters more than the named versus open peril question does. We have a complete guide to flood zones and flood insurance in Austin if that is your situation.
Earthquake, wear and tear, termites and other pests, and continuous or repeated seepage of water are also excluded across the board, per TDI’s list of common exclusions. An open peril policy is broader. It is not unlimited, and anybody selling it to you that way is overselling it.
If you want the deeper background on coverage limits, endorsements, and what a Central Texas policy typically runs, our complete guide to homeowners insurance in Austin and our breakdown of what homeowners insurance actually costs in Austin both go further than this post does.
Frequently Asked Questions
Before you sign anything
Pull your current declarations page right now and find the form name. It is usually in the top third of page one. If it says HO-A and you have a mortgage and a roof older than your youngest kid, you have a phone call to make this week.
And if you are shopping for a house in Austin, Lakeway, or anywhere out in the Hill Country, insurability is part of the deal analysis, not a formality you handle after the inspection clears. At Neuhaus Realty Group we push clients to get a quote in the first 48 hours of the option period for exactly this reason. It has killed a couple of deals for my buyers over the years, and every one of those was a deal worth killing.
Got a house under contract and want a second set of eyes on it before your option period runs out? Get in touch, or reach out to Ed Neuhaus directly. Be safe, be good, and be nice to people.
