Relating to payment of the replacement cost of lost or damaged property under a homeowner's, renter's, or condominium owner's insurance policy.
The provisions of HB854 are set to apply to insurance policies that are delivered, issued for delivery, or renewed on or after January 1, 2026. This timing gives the insurance industry a grace period to adjust their practices and ensure compliance with the new requirements. The act will take effect on September 1, 2025, allowing insurers to prepare for the changes mandated by the bill. By standardizing the amount and timing of initial payments on claims, the legislation is expected to improve the speed and reliability of claims processing for residential property damage.
House Bill 854 aims to amend the Texas Insurance Code by establishing specific requirements for replacement cost coverage provided under homeowner's, renter's, and condominium owner's insurance policies. The bill stipulates that insurers are required to pay a minimum of 80 percent of the estimated cost of repair or replacement when a valid claim for loss or damage to insured property is made. This initial payment is designed to support policyholders in managing on-the-ground repair efforts while waiting for further reimbursement from the insurance company after the repair documentation is provided.
Although the bill appears to address the needs of insured homeowners and renters, it may encounter opposition from insurance providers concerned about the potential increase in immediate cash outflows. Insurers might argue that the requirement for an 80 percent initial payment could strain their financial reserves, particularly if many policyholders submit claims simultaneously. There is also the risk that the bill could lead to higher premiums for consumers as insurance companies adjust their pricing models in response to the new mandate.