Pursuant to Texas Administrative Code §5.9917 and Texas Insurance Code §2211.151 - §2211.154, the agent submitting an application to TFPA for the subject property MUST maintain proof of declination from an authorized insurer and provide such proof to the Association, if requested.
Agents may use this Proof of Declination of Coverage form for each TFPA application submitted to confirm compliance with TFPA standards.
Summary of Key Criteria for Proof of Declination
A. The declining insurer must:
- Be authorized to engage in the business of residential property insurance in the state of Texas. Surplus lines companies do not qualify.
- Be offering new or renewal residential property coverage in the areas served by the Texas FAIR Plan Association.
- Refuse to either:
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- Offer (or renew) residential property insurance coverage for the subject property, or
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- Provide basic property coverage requested by the applicant that is substantially equivalent to coverage available through TFPA. For example, if the lowest deductible offered by the insurer is greater than that which can be obtained from TFPA.
B. Proof of declination must:
- Document the refusal and include the name of the authorized residential property insurer and the date of the declination. For example, a note in the file by the agent on what he or she relied upon (e.g., insurance guidelines, etc.) to meet the declination requirement as well as the name of the insurer and the date of declination.
- Two declinations must be obtained for new coverage, and for renewal policies, two updated declinations are required every two calendar years.
- Be maintained either in writing or in electronic format.
- Be maintained for a period of not less than five years following the date of the submission of the application for Association coverage.
Frequently Asked Questions About Declinations
What is a declination?
A declination is either A. or B. below:
- A. An authorized insurance company refuses to offer new or renewal residential property coverage for the subject property, or
- B. An authorized insurance company offers residential property coverage, but this coverage is more restrictive than coverage available from TFPA. For example, the authorized insurance company offers only a high deductible or no replacement cost coverage.
From which authorized insurance company must a declination be obtained?
A declination must be obtained from an authorized insurance company that is offering new or renewal residential property coverage in Texas. A surplus lines insurance company does not qualify.
You may wish to check www.helpinsure.com for additional information about which commercial and residential insurance companies offer property coverage in your area. If necessary, please contact these companies directly to verify that they are authorized to, and do, offer residential property insurance in Texas.
What is proof of declination?
Proof of declination must comply with all elements of TFPA’s declination of coverage requirements through the documentation of the following facts:
- The reason for the declination
- The date of the declination; and
- The name of the authorized insurance company offering new or renewal residential property coverage in Texas.
Agents may use the Proof of Declination of Coverage form to document compliance with TFPA standards. Please note, by completing and submitting the Proof of Declination of Coverage form you are affirming that the declination described on the form complies with all elements of TFPA’s declination of coverage requirements.
How many declinations of coverage are required by TFPA?
Two declinations are required for new coverage, and two new declinations are required every two years thereafter for renewal coverage.
What can happen if TFPA determines that an applicant or a policyholder does not have the proper declinations?
TFPA has the authority to cancel the residential property policy. TFPA will provide the agent and insured a 30-day Notice of Cancellation prior to cancellation. The cancellation may be rescinded if the agent or insured provides the required, compliant declinations prior to cancellation.
Must an agent have an appointment with the authorized insurance company that provides the declination?
No. A declination can be obtained by either the agent or insured.
Is an agent expected to provide TFPA a copy of their company’s insurance guidelines as proof of declination?
No. Insurance guidelines are generally confidential and proprietary. Agents may use the Proof of Declination of Coverage form to confirm compliance with TFPA standards.
If the premium for TFPA coverage is lower than the premium offered by an authorized insurer, does this difference in cost qualify as a declination?
No. A declination requires an actual refusal to offer residential property coverage or an offer of coverage that is more restrictive than what is available through TFPA. The difference in premium does not meet TFPA’s declination requirements.