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.
7. Towing and Labor Coverage
What it pays: Towing charges when your car can’t be driven. Also pays labor charges, such as changing a flat tire or jump-starting your battery.
8. Rental Reimbursement Coverage
What it pays: A set daily amount for a rental car if your car is stolen or is being repaired. Your company only pays for repairs that were caused by an event – such as fire or theft – that your policy covers.
Other Coverages
You may buy other coverages for an additional premium to cover items in your car, new or additional cars, rental cars, or driving in Mexico.
Stereo Equipment
Your policy won’t pay for CDs, MP3 players, cell phones, citizen band radios, or stereo equipment not installed in your car.
New or Additional Cars
If you buy another car, your policy might automatically cover it with certain limitations. Read your policy or ask your agent to find out if you have this coverage.
Insurance companies must give additional cars the same amount of coverage as your car with the most coverage. For example, if you have two cars – one with liability coverage only and one with liability, collision, and comprehensive coverages – and you buy a third car, the third car will automatically have liability, collision, and comprehensive coverage.
Insurance companies will give replacement cars the same coverage as the car it replaced. For example, if you trade in an older car that only had liability coverage, the new car will automatically have only liability coverage.
Be sure to tell your insurance company within 30 days that you have added or replaced a car and which coverages you want. You could lose coverage on an additional or replacement car if you wait longer to tell your insurance company.
Rental Cars
Rental car agencies offer collision damage waivers and liability policies. The collision damage waiver isn’t insurance. It is an agreement that the rental company won’t, with certain exceptions, try to make you pay for any damage to a car you rent.
If you have auto insurance, your policy may already cover damage to a rental car, but the coverage might be less than the value of a rental car. Read your policy to know what’s covered and the coverage limits. If your coverage limit is too low, consider increasing it. You will pay more in premium, but it might be cheaper than buying additional coverage through the rental agency, especially if you rent cars often. If you aren’t sure if your policy covers damage to a rental car, ask your agent before you rent the car.
If you don’t own a car, but borrow or rent cars often, you can buy a non-owner liability policy. A non-owner policy pays for damages and injuries you cause when driving a borrowed or rented car, but it doesn’t pay for your injuries or damage to the car you are driving.
Driving in Other States, Canada, and Mexico
Your insurance should cover you if you drive in other U.S. states and Canada. Your policy won’t cover you in Mexico because Mexico doesn’t recognize U.S. auto liability policies.
Mexican authorities may hold drivers criminally and financially responsible for any auto accidents they cause. If you’re in an accident that results in an injury, police may keep you until they decide who is at fault. You will be asked to show you have insurance the Mexican government will accept or prove that you can pay any judgment against you.
Some U.S. insurance companies provide a free endorsement for your policy that covers occasional trips of up to 10 days and up to 25 miles into Mexico. You can buy coverage for longer stays, but it usually only covers you within 25 miles of the border. These endorsements might not meet Mexican legal requirements.
Some companies sell a Mexico tourist endorsement to attach to your Texas policy. This endorsement extends your liability coverage to pay costs exceeding a Mexican liability policy’s limits. It covers trips of any distance and any length of time. Ask your agent which endorsements your insurance company offers.
You may also buy Mexican liability insurance from authorized Texas agents. Check your phone book for listings of insurance agents who specialize in auto insurance for travel in Mexico. Your local agent also might be able to help you find coverage with a Texas-licensed Mexican company.
Auto Insurance for Young Drivers
Parents can usually add their children to their auto policy to meet the state’s financial responsibility requirements. Adding a young driver to your policy can be expensive, but it’s cheaper than buying a separate policy.
Some policies require all covered drivers to be named on the policy. Be sure to call the company to tell them about new drivers as soon as they turn 16. If you don’t have all of the drivers in your family listed on your policy and the company learns about them later – because of an accident claim, for instance – the company may bill you for the extra premium you should have paid, deny your claim and coverage, or refuse to renew your policy in the future.
Generally, if a teenager is the main driver of a particular car, the company will base the teen’s rate on that car. Otherwise, the company will base the teenager’s rate on the car in the family (usually the most expensive) with the highest rate.
Children Away at School or Not Living with You
You may want to take your children off your policy when they move out. You’ll probably have to prove to the insurance company that your child has moved. You can use documents like a driver’s license, lease agreement, or utility receipts to show that your child has a different address.
It’s probably not a good idea to remove children from your policy if they are living in another city and going to school. It’s risky to drop coverage if your teenager might occasionally drive at school or when home on visits. Many insurance companies will require you to keep students on your policy, even if you would like to remove them.
If you have children living in another city and going to school, tell your insurance company. Companies base rates on where a car is usually located, and it might need to adjust your premium. If the school is in another state, check on the financial responsibility laws in that state to make sure you have the right coverages.
If your child is away at school without a car, you might be eligible for a premium discount. Ask your agent if the company offers the discount.
Saving Money on Insurance for Young Drivers
Some insurance companies give a discount for teenagers who complete a Texas Department of Public Safety (DPS)-approved driver education course. Drivers taught by their parents may also get the discount if the parent used a DPS-approved course. Some companies offer discounts to young drivers who make good grades in school or who belong to certain youth groups. Ask your agent about discounts.
Understanding Rates
Texas law requires insurance rates to be reasonable, adequate, not discriminatory, and not excessive. Auto insurance companies in Texas set their own rates and file them with TDI for review. Companies don’t have to receive prior approval before using their rates but TDI can make a company give refunds if it decides the company’s filed rates are excessive.
Factors that Affect Your Premium
Companies use a process called underwriting to decide whether to sell you a policy and what rate to charge you. Companies must file their underwriting guidelines with TDI and update them each time they make a change. The factors companies typically use to set premiums include:
- Your age and, for younger drivers, your marital status. Men under 25 and unmarried women under 21 have the highest rates. Drivers over 50 may get discounts.
- Your driving record and claims history. A good driving record can save you money. Insurance companies will charge you more if you have accidents or tickets on your driving record. Companies may also charge more for major convictions, some driving violations, and accidents that damage property. Some surcharges are mandatory and will apply to your premium for three years.
- Where you keep your car. Rates are typically higher for people who live in cities because they have more accidents and auto thefts than people who live in rural areas.
- Your car’s type. Collision and comprehensive rates are highest for luxury, high-performance, and sports cars. Rates may also be higher for cars that damage easily or cost more to repair.
- Your car’s primary use. Your rates will be higher if you drive your car to and from work or for business. Rates are lowest for people who only drive for pleasure.
- Your credit score. Companies often use your credit scores to decide if they want to sell you a policy and at what cost. A company can’t refuse to sell you a policy or cancel or nonrenew your policy based only on your credit. Visit the Learning Center on HelpInsure.com, a website maintained by TDI and the Office of Public Insurance Counsel, to find out which companies use credit scores and how they use them.
- Whether you drove uninsured in Texas. Companies may charge more if you drove without insurance in Texas for more than 30 days in the 12 months before you applied for insurance. If you didn’t, a company can’t charge you more for liability coverage because of your prior lack of coverage.
Discounts
Discounts can help you save money on your premium. Discounts vary by company. The following is a list of some of the ways you could receive a discount:
- defensive driving courses
- driver education courses for young drivers
- students with good grades
- parent or family whose young driver is away at school without a car
- more than one car on a policy
- policy renewal with good claims and driving records
- a homeowners policy with the same company.
You might also qualify for a discount if your car has
- airbags and automatic seatbelts
- automatic daytime running lights
- antilock brakes
- anti-theft devices.
Auto Insurance for High-Risk Drivers
Before writing or renewing a policy, insurance companies try to determine whether you’re likely to cause an accident. They’ll check your driving history, insurance claims history, and sometimes your credit score.
If you have accidents or tickets on your driving record, you’ll probably be classified as a high-risk driver and will have to pay more for insurance. Companies may add surcharges to your premium – some as high as 60 percent – for the following:
- accidents (the more accidents, the higher the surcharge)
- tickets for moving violations (speeding, etc.)
- involuntary manslaughter
- driving under the influence
- criminally negligent driving
- driving without a license or with a suspended license.
Hopefully this answers all of your questions. If you need help on finding auto insurance please feel free to contact A-Best Insurance at 713-475-1967.
Thank you!