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Texas Automobile Insurance Explained
In Texas, everyone that owns a car is required to carry auto liability insurance in case of an accident. This insurance coverage pays to repair the other driver’s car or pays damages up to the policy limits when the accident was your fault.
The minimum coverage in the state of Texas for liability is 30,000 for each injured person with a total of 60,000 per accident. Property damage coverage is a minimum of 25,000 per accident. This is known as the minimum 30/60/25 coverage.
While liability coverage is what is required in Texas, people who can afford to do so should consider additional coverage. We recommend that those that can obtain underinsured motorist coverage or underinsured motorist coverage as well as personal injury protection coverage.
There are many accidents throughout the state of Texas with drivers who do not actually have valid car insurance at the time of the crash. If you happen to be in an accident with one of these people and the crash was their fault, you may end up holding the bag unless you have uninsured motorist coverage.
Unfortunately, Texas has a very high percentage of drivers who do not carry liability coverage. The problem has been exacerbated by the Department of Insurance in Texas allowing insurance companies to sell “junk policies”.
Many people believe that they have insurance coverage only to find out that they do not after a car wreck.
Proof of Financial Responsibility and liability coverage is required in at least the following circumstances:
- When asked by an officer.
- When in an accident.
- When you register or renew your registration.
- At your annual car inspection
Fines can be up to $350 and more for the first offense of failing to have proof of financial responsibility.
Use caution when obtaining insurance coverage.
Common limitations or exclusions from coverage include the following:
- Named driver policies – covering only those who are specifically named in the policy.
- Excluded drivers – does not cover people excluded under the policy.
- Business use exclusion – does not provide coverage if the vehicles used for business purposes at the time of the accident.
There are many other exclusions and one should read their policy closely or sit down with their insurance agent and go over your policy at the time of purchase or renewal.
It is much better to spend 15 minutes with your agent than end up with a large bill you are not planning on paying because you do not have the coverage you thought you did.
A. Liability Coverage
Liability coverage pays damages suffered by other people when you are at fault in the accident.
Common damages include the following:
- Personal injury damages.
- Repair costs for replacement their market value for damaged vehicles.
- Rental car expenses for the other driver while their cars being fixed.
Liability coverage generally includes you and your family members, people driving your vehicle with your permission, and family members attending school away from home. However, it is prudent to check your own policy for exclusions or limitations of coverage (given the junk policy problems in Texas).
B. Collision Coverage
Collision coverage pays for the cost of repairing your own car after an accident. If your vehicle were totaled out you would only receive the fair market value for your vehicle less your deductible.
C. Comprehensive Coverage
Comprehensive coverage pays the cost of repairing your car or replacing it if it is stolen, damaged by the weather, or other events other than an automobile accident. Comprehensive coverage will also pay the rental car if your vehicle happens to be stolen.
D. Medical Payment Coverage
Medical payment coverage pays medical and/or funeral bills from accidents up to the amount of the limits. It covers you, your family members and passengers regardless of fault. Unfortunately, if you collect from a third party such as a negligent driver medical payment coverage requires you to pay your insurance company back. For this reason, personal injury protection is preferred over medical payment coverage.
E. Personal Injury Protection (PIP)
Personal injury protection covers the same medical expenses as medical payment coverage but it also covers up to 80% of your lost wages. Additionally, medical payment coverage does not need to be repaid if you collect from the negligent driver. The minimum limits of PIP coverage are $2500 but you can buy more coverage if you are inclined. Personal injury protection must be rejected in writing.
F. Underinsured/ Uninsured Motorist Coverage (UM/UIM)
In Texas and particularly in Houston, underinsured and uninsured motorist’s coverage is essential if you can afford it. The sheer number of drivers who are driving without insurance coverage makes the odds of your being in an accident with an uninsured driver very high.
Underinsured coverage pays your damages up to the policy limits when the person that caused the accident did not have enough liability coverage.
Uninsured motorist coverage pays your damages when you’re involved in an accident caused by another and they did not carry liability coverage.
You must specifically reject underinsured/underinsured motorist coverage and your insurance carrier must offer you the option of purchasing such coverage.
G. Rental Coverage
This type of coverage pays for a rental car if your car has been stolen or damaged in an accident. Usually, the benefit is a set dollar per day with a limited number of days.
H. Towing Coverage
This coverage pays for towing a car after an accident and can also include other labor charges such as jumping your battery when your vehicle is disabled.
Everyone who carries automobile insurance coverage should consider sporadically pricing comparable options from other insurance companies. Many people are surprised that the savings they can accrue if they have been with a company for a number of years without obtaining competitive quotes.
Consumers should also research insurance carriers that are considering buying auto insurance from. Many of the major companies have worked hard on their reputation for customer service. Others have developed a reputation for failure and refusal to pay legitimate claims and requiring litigation to resolve a claim.
Many Texas families are unnecessarily subjected to litigation simply because the insurance carrier they chose has determined to play hardball with every person who makes a claim. This dilemma has been magnified under the provisions of “tort reform” implemented several years ago in the state of Texas.
Additionally, the failure to have a real remedy when an auto insurance company abuses the claim handling procedures has been a real problem for Texas families.
Make sure the insurance company you choose to do business with has a good reputation of being fair in the claims process or you may find the claims process extremely upsetting.
Additional information regarding insurance coverage can be found at www.tdi.texas.gov.