All states have a legal minimum insurance coverage that drivers are required to maintain in order to continually register and operate their vehicles. Texas is no exception, and state law also mandates that drivers who cause an accident here resulting in injury or damage pay for those damages. The issue that arises, however, is that the legal minimum insurance requirements do not always provide enough coverage for the amount of damage caused. The severity of injuries caused in car accidents, the amount of property damage that can occur, and the rising costs of healthcare and car prices mean that the baseline requirements leave at-fault drivers with maxed–out policy payments and in a position to be personally liable for remaining accident expenses.
In light of this issue, and to protect their ownership interests, lenders who finance car loans require higher thresholds of coverage for the policyholders who are still paying off their cars. Minimum insurance coverage terms for financed cars in Texas are significantly higher than the state’s base requirements and go much further to cover the costs of accidents. It is clear that not all insurance policies are created equal. The types of insurance, descriptions of coverage, and requirement information that follow shed light on the options and decisions that customers face when selecting their specific policy.
If you have questions about your coverage or an at-fault driver’s coverage after an auto accident, consult an expert auto accident attorney for a better understanding of and advice on your options. Thompson Law offers free consultations to discuss your accident and injuries, and our experts can provide guidance for your next steps. It can be extremely challenging to navigate the insurance landscape alone. Fortunately, you do not have to. Thompson Law is here for you when you need us.
Types of Insurance Coverage
In order to really evaluate the level of protection that a given insurance policy provides, it is important to start with a good understanding of insurance terms, types and uses:
Bodily Injury (BI) – Insurance that covers the personal injury costs caused by an accident. It can be allocated per person or per accident. One of the minimum coverage types required in Texas.
Collision Coverage – Insurance that covers the cost of repairing your car, if it is repairable. If it is not, it pays the actual current cash value of your car based on its age, mileage, and other factors that impacted its depreciation since purchase.
Comprehensive Coverage – Insurance that covers the cost of replacing or repairing your car if it is stolen, vandalized, damaged by fire, weather or a collision. Sometimes referred to as hazard insurance or catastrophic loss insurance, particularly in cases of severe natural events. This insurance sometimes includes payment for your rental car while the issues with your vehicle are addressed.
Deductible – Not a type of insurance, but important to understand in this context. The amount that you are responsible for paying before your insurance coverage takes effect, covering more or the full remainder of your accident expenses. Typically lower when you have high premiums, and higher when you pay a low monthly or annual premium.
Full Coverage – While not a specific type of insurance, the term is a way of describing a combination of coverages, typically taken to include collision, comprehensive, and Uninsured/Underinsured Motorist policies. Full coverage insurance is more expensive than limited coverage, and it offers greater protection for more types of damage to your vehicle.
Liability Insurance – Coverage for financial damages when you are at fault in an accident. It encompasses Bodily Injury (BI) and Property Damage (PD). Required by law in the US, individual states are responsible for setting minimum amounts.
Medical Payment Coverage – Insurance that helps pay the costs of medical bills resulting from the accident.
Minimum Coverage – Another term that is not a specific type of insurance but instead denotes a combination of coverage types just sufficient to meet state limits. (See Texas’ minimum coverage limits in the next section.)
Multiple Coverages – The combinations of insurance that are included in a single policy.
Personal Injury Protection (PIP) – Like Medical Payment Coverage, but PIP also provides insurance for lost income and costs of caregiver services for injuries sustained by the covered individual. All policies in Texas automatically include PIP, although customers can elect out of the coverage by written agreement.
Premium – Not a type of insurance, but important to understand in this context. The monthly or annual payment costs that you have to maintain your insurance coverage. Typically lower when you have a higher deductible, and higher when you have a low deductible.
Property Damage (PD) – This insurance covers the damage that you cause to someone else’s property, usually up to a predetermined limit. One of the minimum coverage types required in Texas.
Rental Car Coverage – Sometimes part of your comprehensive coverage package, this covers your rental car expenses up to a certain amount or for a certain duration of time while your car is inoperable, stolen, or being repaired or replaced.
Towing and Labor – Sometimes referred to as Roadside Assistance, this is insurance for services such as towing, changing a flat tire, jump-starts, and some other cases where your car is inoperable.
Underinsured Motorist (UIM) – Coverage for you in the case that the other motorist does not have enough insurance to cover all of the costs incurred by the accident. Texas insurance companies must offer you this coverage, and you may elect to opt-out of it by written agreement.
Uninsured Motorist (UM) – Coverage for you in the case that the other motorist does not have auto insurance. Texas insurance companies must offer you this coverage, and you may elect to opt-out of it by written agreement.
If you have questions about your coverage or an at-fault driver’s coverage after a motor vehicle accident, feel free to reach out. Our compassionate and professional legal experts are standing by 24/7/365 to take your call, discuss the details of your accident, and help you navigate your options going forward.
Minimum Coverage Limits in Texas
Purchasing a valid and current automobile insurance policy is the most common and most highly recommended way for drivers to provide the evidence of financial responsibility that the state requires to drive legally. Once a driver has selected their coverages and entered into the insurance agreement, the providing company is required to mail a proof of insurance card and copy of the Consumer Bill of Rights to their customers. It is best practice for drivers to keep their insurance card in their glove box and wallet. In the case of an accident, or a police officer stop, registration renewal or inspection, you will be asked to present this document for verification.
Legal Minimum in the State of Texas
Liability coverage, sometimes referred to as the “30/60/25” plan is required in Texas.
State law regulates the minimum requirement.
Types of Coverage and Minimum Amounts:
$30,000 Bodily Injury Liability (BI) per individual
$60,000 Bodily Injury Liability (BI) per accident
$25,000 Property Damage Liability (PD)
What it Covers:
Insurance payouts up to these amounts may be issued based on loss and injury caused in the accident.
UM/UIM and PIP must be offered by insurers but can be rejected in writing by the policyholder. It is important to understand as a policy owner that if you are involved in a collision with an at-fault party who does not have insurance or a party with an insufficient policy, it is very difficult to recover damages for your injuries unless you have UM/UIM and/or PIP.
Car Insurance Minimums for Financed Cars
If you are still making payments on your car loan, your lender is allowed to dictate the level and types of coverage that you have. If your policy is found to be out of compliance with the requirements of your lender, you risk being in default of your loan. Lenders are granted this power during the term of your payments because they are the owner and financial stakeholders of your vehicular property. The below are recommended amounts by Texas auto insurers, although your lender may require different amounts based on the value of your car and other factors.
Type of Coverage and Recommended Amounts:
Recommended $100,00 Bodily Injury Liability (BI) per individual
Recommended $300,000 Bodily Injury Liability (BI) per accident
Recommended $50,000 Property Damage (PD)
Comprehensive Collision Coverage
Underinsured/Uninsured Motorist Coverage (UM/UIM)
Personal Injury Protection (PIP)
What it Covers:
Insurance payouts up to these amounts to be issued based on loss and injury from the accident.
Repair/Replacement of the vehicle if it is hit, stolen, damaged or totaled.
May include rental car coverage, roadside assistance, and extra coverages as dictated by the particulars of the collision coverage policy.
The legal minimum is simply not enough coverage when you look at the high costs of car accidents. The minimums for financed cars provide a better starting point for determining what auto policy to purchase. Even if you have paid off your car and there is no lien holder dictating your decision, it is natural to want to make a sound and informed choice for the security of you and your passengers.
If your policy limits are not sufficient to cover the costs that follow a serious accident, this can have huge impacts on your life. You can lose your savings, home, investments, other assets, damage your credit, and have your wages garnished into the future. Picking an insurance policy at a price point you can afford with adequate coverage to keep you safe and secure can feel like a game of “Better Safe Than Sorry.”
Differences in Minimum Coverage Between Texas and Other States
Texas’ minimum state requirements rank relatively well when considered nationally. The 30/60/25 plan alone mandates a higher minimum threshold than over 28 other states. Texas would fare even better in national rankings, beating out the coverages of about a dozen more states, if it took a different approach to UM/UIM coverage. In addition to Bodily Injury Coverage per person, per accident, and Property Damage per accident, about half of US states require some minimum amount of coverage for the case of a wreck with Under-Insured or Uninsured motorists.
It is understandable that people are often frustrated by this concept. Why should individuals have to pay higher premiums for more comprehensive plans when it is already a legal requirement that all drivers carry some level of insurance? Shouldn’t that mean there is enough coverage out there to cover the accidents we have? Unfortunately, the reality is there are many people who do not follow the law and do not have insurance. In Texas, it is estimated that 1 in 5 or about 20% of vehicles are uninsured. Even for those who are insured to the bare minimum standard, the payout is simply not enough. The average new car price in 2019 is about $37,000, so the $25,000 property damage requirement is unlikely to cover one totaled vehicle, let alone multiple cars and other damaged property. While the higher price of a precautionary premium may be a nuisance, you will be extremely grateful for the additional payout that you receive after you suffer an accident with extensive bills and insufficient coverage to offset these expenses.
What Do These Minimums and Requirements Mean for You?
Selecting an insurance plan with adequate protection is an important decision. In the event that you cause an accident, you want the premiums you have been paying to be put to good use covering the costs. Adding PIP, UM/UIM, collision, and comprehensive insurance on top of required liability coverage sets you up for the best outcome after the accident and can help prevent you from being personally sued for accident costs. Conversely, if you are hit by a driver who is under or uninsured, knowledge of the insurance types and practices along with the legal counsel of an experienced accident attorney will be a tremendous asset. Ensure that you gain every bit of your rightful compensation and are prepared to bring a lawsuit against the driver that hurt you by making the right insurance choices today.
Ryan L. Thompson and his dedicated team at Lion Law are leaders in the Dallas personal injury space. Consequently, these experts have handled many automobile accident claims and cases. They have seen firsthand the damage that can happen to individuals and families who suffer serious accidents and have little to no recourse for insurance payout. Don’t let a split-second accident mean life changing financial burden.
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