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Automobile Insurance Made Easy


Texas law requires people who drive in Texas to pay for the accidents they cause. Most drivers do this by buying 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 at fault in an accident.

If you buy insurance to meet the state's financial responsibility law, you must buy at least the minimum amount. 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.

Because of car prices and the high cost of medical care, the minimum amounts might not be enough to pay all of the other driver's costs if you're in an accident. Other drivers could sue you to collect the difference. Consider buying more than the basic limits to protect yourself financially.

Liability insurance doesn't pay to repair or replace your car or to treat your injuries. Consider buying other types of coverage - such as medical payments, collision, and comprehensive - to pay for these expenses.

Proof of Financial Responsibility

When you buy an auto policy, your insurance company will send you a proof-of-insurance card. You must show your current card when you

  • are asked for it by a police officer
  • have an accident
  • register your car or renew its registration
  • get or renew your driver's license
  • have your car inspected.

The penalties for violating the state's financial responsibility laws are

  • First offense: fine of $175 to $350
  • Additional offenses: fine of $350 to $1,000, suspension of your driver's license, and impoundment of your car
  • Offense without a driver's license: $2,000 maximum fine, 180 days in jail, or both
  • Offense if you cause an accident with serious injuries or death: $4,000 maximum fine, one year in jail, or both.

Know Your Rights

Texas has a Consumer Bill of Rights for auto insurance. Your insurance company must send you a copy with your policy. Read it to understand your rights under Texas law.

Auto Insurance Coverages

Depending on the types of coverage you have, auto insurance pays for car repair or replacement, medical expenses, rental cars, towing, court costs, and other expenses.

Read your policy carefully because coverages vary. Pay special attention to who is covered under your policy and to the exclusions, which lists the things your policy doesn't cover. The following are common limitations or exclusions you might find on your policy:

  • Named driver. Some policies only cover household residents who are specifically named on the policy.
  • Excluded driver. Excludes coverage for people specifically named in an endorsement that may be attached to your policy.
  • Business use. Excludes coverage if you use your car for business, such as pizza or newspaper delivery.
  • Racing. Excludes coverage if you use your car in a racing event.
  • Intentional acts. Excludes coverage for losses that were intentional.

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.

Note: The deductible is the amount you must pay before the insurance company will pay. For example, if you have a claim for $1,000 and a deductible of $300, the insurance company will automatically deduct $300 from the amount it will pay you.

Many insurance companies use the Texas Personal Automobile Policy, a standardized policy form that offers eight types of coverages. Companies sell other policies that the Texas Department of Insurance has approved. Although your coverages and policy terms may be different from these, this summary can help you understand the basic eight coverages.

1. Liability Coverage (Basic liability coverage meets the state's financial responsibility requirement.)

What it pays: The following expenses, up to your policy's dollar limits, for the people in the other car involved in an accident that you or someone covered by your policy caused:

  • medical and funeral costs, lost wages, and compensation for pain and suffering
  • car repair or replacement costs
  • car rental while the other driver's car is being repaired
  • punitive damages awarded by a court.

Liability insurance also pays your attorney fees if someone sues you because of the accident. If you are arrested following an accident, liability insurance will pay up to $250 for bail.

Who it covers:

  • you and your family members. (Family members include anyone living in your home related to you by blood, marriage, or adoption. This includes your spouse, children, in-laws, adopted children, and foster children.)
  • other people driving your car with your permission
  • family members attending school away from home
  • spouses living elsewhere during a martial separation might be covered.

You and your family members might be covered when driving someone else's car - including a rental car - but not a car that you don't own but have regular access to, such as a company car.

Some policies won't cover other people who are residents of your household, 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 the policy covers.

2. Collision (damage to your car) Coverage

If you still owe money on your car, your lender will require you to have collision and comprehensive coverages.

What it pays: The cost of repairing or replacing your car after an accident. You will only receive the amount of your car's actual cash value, minus your deductible. Actual cash value is the market value of a car like yours without damages.

Who it covers: You, your family members, passengers in your car, and others driving your car with your permission.

3. Comprehensive (other than collision) Coverage

If you still owe money on your car, your lender will require you to have collision and comprehensive coverage.

What it pays: The cost of replacing or repairing your car if it is stolen or damaged by fire, vandalism, hail, falling objects, or an event other than a collision. Comprehensive coverage also pays for a rental car or other temporary transportation if your car is stolen. 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.

4. Medical Payments Coverage

What it pays: Your medical and funeral bills resulting from accidents, including an accident involving a pedestrian or bicyclist.

Who it covers: You, your family members, and passengers in your car, regardless of who caused the accident.

5. Personal Injury Protection (PIP) Coverage

What it pays: Same as medical payments coverage, plus 80 percent of lost income and the cost of hiring a caregiver for an injured person.

Who it covers: You, your family members, and passengers in your car, regardless of who caused the accident.

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.

6. Uninsured/Underinsured Motorist (UM/UIM) Coverage

What it pays: Your expenses from an accident caused by an uninsured motorist, a motorist who did not have enough insurance, or a hit-and-run driver. Also pays for personal property that was damaged in your car.

There is an automatic $250 deductible, which means you must pay the first $250 of the expenses yourself before the company will begin to pay.

There are two types of UM/UIM coverage:

  • Bodily injury UM/UIM pays for medical bills, lost wages, pain and suffering, disfigurement, and permanent or partial disability. There is not a deductible with this type.
  • Property damage UM/UIM pays for auto repairs, a rental car, and damage to items in your car.

Who it covers: You, your family members, passengers in your car, and others driving your car with your permission.

Insurance companies must offer UM/UIM coverage. If you don't want it, you must reject it in writing.


from tdi.org

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