Understanding Your Insurance Policy

UNDERSTANDING YOUR INSURANCE POLICY EXPLAINED

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 for the other person’s damages when you are at fault in an accident. The law currently requires minimum liability coverage of $30,000 per injured person, $60,000 for everyone injured in an accident, and $25,000 for property damage (30/60/25).

The declaration page on your auto insurance policy indicates the details of your coverage. Coverage is the amount of money the insurance company will pay in case of an incident. The amount of coverage you want to purchase is different if you use your vehicle for personal use rather than commercial use. The language in your auto insurance policy may limit who can drive your vehicle. Also, it may limit the use of the vehicle for certain a purpose. In some cases, the insurance companies expressly exclude high risk drivers from the policy to write a cheaper policy. For example, if you are an Uber driver some of the insurance companies now require that you purchase a commercial auto insurance policy.

Your auto insurance policy language may limit who can drive your vehicle besides you. They may require additional information as to the people who are going to be permitted to drive your vehicle. In case of an incident the auto insurance company may deny you coverage because the individual was excluded on your policy. Some insurance companies specifically require you to provide your spouse’s information in order to issue you a auto insurance policy.

Good practices:

1. You want to make sure the person driving your vehicle has a valid state license.
2. You want to make sure you are buying a Standard Texas policy and not non-standard auto insurance policy sold by companies like ACCC, Baja, Elephant, Fred Loya, and other smaller companies.
3. You may be individually held responsible for the person driving your vehicle. Always make sure they are not driving under influence of alcohol or durgs. Click Here to learn more about Negligence Entrustment.

Collision coverage, Comprehensive coverage, Gap insurance, Uninsured and Underinsured covers your own vehicle in case of an incident where you may be at fault or the other party does not have enough insurance. Usually, most auto insurance policy require a deductible for purchasing any of these coverages. The deductible may start from $250.00 and as high as $3,000.00 depending on the kind of policy you buy. The deductible is a non-refundable amount of money that you pay to the insurance company for the policy to apply. Look below to find additional information on different policy coverages.

Liability coverage pays for the person who is not at-fault. It covers their medical bills, funeral costs, lost wages, compensation, property damage, loss of use, pain and suffering. These are covered up to your policy limits as indicated on your declaration page. A standard Texas liability provides coverage to you and your family members and other people driving your car with your permission. However, who pays for your medical bills and lost wages? Personal Injury Protection (PIP) coverage pays for you and your passenger’s medical bills and lost wages up to the policy limits indicated on your declaration page, no matter who is the at fault party.

1. Liability coverage pays for the other persons medical, funeral costs, lost wages, compensation, property damage, loss of use, pain and suffering. These are covered up to your policy limits. A standard Texas liability coverage covers you and your family members and other people driving your car with your permission.
2. Medical Payments (Medpay) Coverage pays your medical and funeral bills resulting from accidents. It covers you, your family members, and passengers in your car, regardless of who caused the accident. Medical Payment Coverage is subject to subrogation, which means your insurance can collect their money back once you collect from the at-fault-party. We usually recommend purchasing a PIP policy over Medpay.
3. Personal Injury Protection (PIP) pays the same as Medical Payments coverage, plus 80 percent of lost income and the cost of hiring a caregiver for an injured person. However, contrary to Medpay PIP is not subject to subrogation, which means you do not have to pay it back if another insurance company pays you for the same bills.
4. Collision Coverage pays 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. It covers you, your family members, passengers in your car, and others driving your car with your permission as well.
5. Comprehensive Coverage pays the cost of replacing or repairing your car if it is stolen or damaged by fire, vandalism, hail, or a cause 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.
6. Towing and Labor coverage pays towing charges when your car can’t be driven. Also pays labor charges, such as changing a tire, at the location where your car became immobile.
7. Rental Reimbursement Coverage pays a set daily amount for a rental car if your car is stolen or is being repaired because of damage covered by your policy.
8. Uninsured/Underinsured Motorist Coverage, or UM/UIM coverage. UM/UIM coverage is first-party insurance that protects injured persons who are involved in accidents with individuals who are not insured or are underinsured. It pays your expenses from an accident caused by an uninsured motorist or a motorist who did not have enough insurance to cover your bills, up to your policy’s dollar limits. It also pays for accidents caused by a hit-and-run driver if you reported the accident promptly to police. 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, a rental car, and damage to items in your car. There is an automatic $250 deductible, which means you must pay the first $250 of the repairs yourself. The UM/UIM policy covers property damage, repairs, replacement and rental car reimbursement. It also covers personal injury and wrongful death claims. An insurance company that pays a UM/UIM claim may offset any payment by the amount of the insured’s recovery against the negligent third party. It covers you, your family members, passengers in your car, and others driving your car with your permission.

Texas has its own policy limit which states that you must have at least the minimum amount of liability coverage required by the state’s 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.