Auto Insurance Made Easy
Auto Insurance Coverage In Texas
Auto Insurance in Texas can sometimes be hard to understand. We all hear about ‘Auto Liability Insurance’ but what does that really mean? Lets start with some auto insurance basics.
What Is Auto Insurance
Auto insurance is a contract between you the policyholder and an insurance company. As a policyholder you agree to pay what is called a ‘Premium’ for insurance coverage on one or more cars that you own and the insurance company agrees to pay losses as defined in your policy.
Basic Auto Liability Insurance
The Texas Department of Insurance sites state law: Texas law requires people who drive in Texas to pay for the accidents they cause. What that means is drivers must buy ‘Auto Liability Insurance’. Liability insurance pays to repair or replace the other driver’s car and pays other people’s medical expenses when you are in an ‘at fault accident’ (an accident you cause because of your negligence while driving).
Special Note: Basic Auto Liability Insurance does not pay to repair or replace your car or to treat your injuries. You must have at least the minimum amount of liability coverage required by the ‘Texas State Financial Responsibility Law’. The current minimum liability limits are $30,000 for each injured person, up to a total of $60,000 per accident, and $25,000 for property damage per accident. This basic coverage is called 30/60/25 coverage. The limits stated here were increased on January 1, 2011; so if you have minimum coverage in Texas and you haven’t reviewed your auto policy lately you probably should review your state required minimum limits coverage with your insurance agent.
Because of car prices and the high cost of medical care today, the minimum amounts might not be enough if you cause an accident. If your liability limits are too low to pay for all of the other driver’s costs, the driver may file legal action against you to collect the difference. To protect yourself financially it is highly recommended that you purchase more than the basic limits.
Special Note: Additional Insurance is available and may be purchased.
Proof of Financial Responsibility
When you buy an auto policy, your insurance company will send you a proof-of-insurance card.
You must show proof of insurance when you:
- Are asked for it by a law enforcement officer
- Have an accident
- Register your car or renew its registration
- Obtain or renew your driver’s license
- Get your car inspected
There are penalties for violating the state’s financial responsibility law. A first conviction will result in a fine between $175 and $350. Subsequent convictions could result in fines of $350 to $1,000, suspension of your driver’s license and impoundment of your automobile.
If you don’t have a valid driver’s license, the penalties for violating the state’s financial responsibility law increases to a fine not to exceed $2,000, 180 days in jail, or both. The penalty increases to a fine not to exceed $4,000, one year in jail or both if you cause a car accident that results in serious injury or death.
Not only are you required to have auto insurance in the state of Texas to legally drive a car but it will cost you big time if you don’t and you are involved in what is called an ‘at fault accident’, an accident you cause because of your negligence while driving.
Auto Insurance Coverages
Auto insurance pays for damages, injuries, and other losses specifically covered by your policy. Many insurance companies use the ‘Texas Personal Automobile Policy’, a standardized policy form that offers ‘multiple coverages’. An insurance company may sell alternative policy types if approved in advance by the Texas Department of Insurance.
Coverages available in the ‘Texas Personal Automobile Policy’ are explained below:
1. LIABILITY COVERAGE (State Basic Auto Liability Coverage is satisfied here)
This coverage applies to injuries that the policyholder and family members listed on the policy cause to someone else. Family members include anyone living in your home related to you by blood, marriage, or adoption, including your spouse, children, in-laws, adopted children, wards, and foster children. Other people driving your car with your permission, family members attending school away from home, and spouses living elsewhere during a martial separation might also be covered.
Usually this coverage can mean: damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures hit in an accident.
You and your family members can be covered when driving someone else’s automobile including a rental car. You can also be covered while driving a vehicle you do not own.
Special Note: Some policies won’t cover other people, including family members, unless they’re specifically named in the policy. Your policy’s declarations page should list the names of all of the people covered by the policy.
A motorist in a serious accident may be sued for large amounts; drivers can opt to buy more than the state-required minimum to protect personal assets such as homes and savings.
What liability coverage pays: Other people’s expenses for accidents caused by you or other drivers covered by your policy up to your policy dollar limits.
Payments may include:
- Other people’s medical and funeral costs, lost wages, and pain and suffering
- Other people’s car repair or replacement costs
- Other people’s auto rental while the other driver’s car is being repaired
- Other people’s punitive damages awarded by a court
Liability insurance also pays your attorney fees if someone sues you because of the accident and your bail may be paid up to $250 if you are arrested.
2. MEDICAL PAYMENTS COVERAGE
This coverage pays for treatment of injury to the driver and passengers of the policyholder’s car, meaning medical and funeral bills resulting from accidents, including those in which the other person is a pedestrian or bicyclist up to the limits of your policy.
You and your family members are covered including passengers in your car regardless of who caused the accident.
3. PERSONAL INJURY PROTECTION (PIP) COVERAGE
This coverage is the same as medical payments coverage, plus 80% of lost income (less any disability coverage in force) up to your policy limits. So at its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.
You and your family members are covered as well as passengers in your car regardless of who caused the accident. Special Note: An insurance company must offer you $2,500 in PIP, but you can buy more. If you don’t want PIP, you must reject it in writing.
4. UNINSURED/UNDERINSURED MOTORIST (UM/UIM) COVERAGE
This coverage pays for your expenses from an accident caused by an uninsured motorist or a motorist who did not have enough insurance to cover your bills (underinsured) up to your policy dollar limits. Uninsured motorist coverage will reimburse the policyholder; a member of the family listed on the policy or with authorization to drive or a designated driver if an uninsured motorist hits one of them. This coverage also pays for accidents caused by a hit-and-run driver if you reported the accident promptly to police. This coverage can also protect a policyholder who is hit while a pedestrian.
Coverage includes payments for:
- Bodily injury UM/UIM pays without deductibles for medical bills, lost wages, pain and suffering, disfigurement, and permanent or partial disability
- Property damage UM/UIM pays for auto repairs. There is an automatic $250 deductible, which means you must pay the first $250 of the repairs yourself.
- You and your family members are covered as well as passengers in your car, and others driving your car with your permission.
Special Note: Insurers must offer UM/UIM coverage. If you don’t want it, you must reject it in writing.
5. COLLISION COVERAGE (Damage to your car)
This coverage pays for the cost of repairing or replacing your car after an accident. Payment is limited to your car’s ‘actual cash value’ minus your ‘deductible’. Actual cash value is the market value of a car like yours without damages; what that mean is your policy pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It can also cover damages caused by potholes. A deductible is your out-of-pocket expense, the higher the deductible the lower your premium (what you pay for the coverage). A deductible is a way to lower the cost of collision insurance coverage.
Even if policyholders are at fault for an accident, collision coverage will reimburse them for the costs of repairing their car, minus the deductible. If the policyholder is not at fault, the insurance carrier may try to recover the amount it paid to the other driver’s insurance company (this is called ‘Subrogation’). If the company is successful with its subrogation efforts, policyholders may also be reimbursed for their deductible.
You and your family members are covered as well as well as passengers in your car and others driving your car with your permission.
6. COMPREHENSIVE COVERAGE (Physical Damage Other than Collision)
This coverage pays for the cost of replacing or repairing your car if it is stolen or damaged by something other than a collision with another car or object such as: fire, falling objects, explosions, earthquakes, windstorms, hail, flood, vandalism and riots, or contact with animals such as birds or deer. Comprehensive insurance is usually sold with a deductible as a way of lowering your premium. It may also reimburse the policyholder if a windshield is cracked or shattered. Some companies offer separate glass coverage with or without a deductible.
Your policy won’t pay for an auto theft unless you report it to police. Payment is limited to your car’s actual cash value, minus your deductible.
Special Note: Texas does not require the purchase of auto insurance collision or comprehensive coverage, but Lenders require that a Borrower carry it until a car loan is paid off.
7. TOWING AND LABOR COVERAGE
This coverage reimburses for Towing charges when your car can’t be driven. It also reimburses labor charges, such as changing a tire at the location where your car became immobile.
8. RENTAL REIMBURSEMENT COVERAGE
This coverage reimburses a set daily amount for a Rental Car if your car is stolen or is being repaired because of damage covered by your policy. Make sure to check and see if your policy has rental car reimbursement, as it is not required that an insurance company make it part of an auto insurance policy. An auto policy is cheaper without it but in today’s economy it is an important part of coverage.
Special Note: It should be noted that reimbursement for a Rental Car is typically for only up to 30 Days. Auto Insurance is an important part of car ownership. Review how much and what type of overall coverage you may need with your agent. Understand how important auto insurance protection is and match the coverages above to your individual needs. Read your policy carefully because coverages can vary by policy and company. Pay special attention to the exclusions section, which lists the things your policy doesn’t cover. The front page of your policy called the ‘Declarations’ or Dec Page shows the exact name of your insurance company, your policy number, and the amount of each of your coverages and deductibles.
Disclaimer: Content and illustrations represented and provided here-in are for informational purposes only. This information should not be misconstrued to be considered Insurance or Binder Coverage for Insurance. Always consult a licensed insurance agent in the state of Texas for specific insurance coverage types and needs analysis as insurance policies in Texas vary.
Sources used to gather content for this Article and all Articles provided in this Series include:
The Costlow Insurance Group, Inc. / www.costlowinsurance.com
a. The Insurance Information Institute / http://www.iii.org
b. The Texas Department of Insurance / http://www.tdi.state.tx.us