Texas Department of Insurance
www.tdi.state.tx.us - Consumer Helpline 1-800-252-3439
Automobile Insurance Made Easy(November 2006) Overview Texas law requires people who drive in Texas to be able to pay for any automobile accidents they cause. Most drivers do this buy buying automobile liability insurance. Auto insurance pays for damages, injuries, and other losses specifically covered by your policy. Coverages can vary by policy and company. Read your policy carefully to know exactly what it covers. Pay special attention to the exclusions section, which lists the things your policy doesn´t cover. The front page of your policy is called the declarations page, or "dec" page. It contains useful information such as the exact name of your insurance company, your policy number, and the amount of each of your coverages and deductibles. Texas law requires minimum coverage of $20,000 per injured person, up to a total of $40,000 for everyone hurt in an accident, and $15,000 for property damage. This basic coverage is called 20/40/15 coverage. However, basic coverage might not be enough if you are held liable for an accident. You should consider buying more than the basic limits. Proof of Financial Responsibility When you buy an auto policy, your insurance company will send you a proof-of-insurance card. You will have to show proof of insurance when you
There are severe legal penalties for violating the state´s financial responsibility laws. A first conviction will result in a fine between $175 and $350. Subsequent convictions could result in fines of $350 to $1,000, suspension of your driver´s license, and impoundment of your automobile. Know Your Rights Texas has an automobile insurance Consumer Bill of Rights. Your company must send you a copy with your policy. Take time to read it to fully understand your rights under Texas law. Auto Insurance Coverages The Texas Personal Automobile Policy offers eight types of coverage. Basic liability coverage meets the state´s financial responsibility laws. If you still owe money on your car, your lender will require you to also have collision and comprehensive coverage. The following describes the eight types of coverage available in the Texas Personal Automobile Policy. Auto insurers may offer alternative policies if approved in advance by TDI. Read your policy carefully, as your coverages and policy terms could differ from those listed below.
Coverage for Stereo Equipment Your policy won't pay for tapes, CDs, cellular phones, citizen band radios, or stereo equipment not permanently installed in your car. However, you can buy endorsements to your policy that provide separate coverage for these items for an additional premium. Insurance Coverage When Renting a Car Auto rental agencies offer collision damage waivers as well as liability policies. The collision damage waiver is not insurance. It is an agreement that the rental company will waive its right to recover the costs of the damage to the auto from the renter with certain exceptions, regardless of who is at fault. If you have auto insurance, your policy may already cover damage to a rental car. Your coverage limit, however, might be less than the value of a rental car. Read your policy carefully 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 may be cheaper than purchasing additional coverage through the rental agency, especially if you rent cars often. The Texas Automobile Rental Liability Policy provides liability insurance for renters who do not have a personal auto policy. 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 not for damage to the auto you are driving. Coverage When Driving in Other States, Canada, and Mexico The Texas automobile policy automatically meets the financial responsibility requirements of other U.S. states and Canada. Mexico, however, does not recognize U.S. auto liability policies. Mexico does not require drivers to have automobile liability insurance. However, drivers can be held criminally and financially responsible for any auto accidents they cause. If you´re in an accident that results in an injury, police in Mexico may detain you until they determine who is at fault. You will have to show that you either have insurance recognized by the Mexican government or the financial ability to pay any judgment against you. You can buy Mexican liability insurance from Texas agents who specialize in it. Some U.S. companies provide a free endorsement extending your policy´s coverage to infrequent trips of up to 10 days and as far as 25 miles into Mexico. You can buy coverage for longer stays, but it is usually valid only within 25 miles of the border. Telephone books in border towns list insurance agents that specialize in car insurance for travel in Mexico. Your local agent also might be able to help you find coverage with a Texas-licensed Mexican company. You also may be able to buy a limited Mexico "tourist" endorsement that extends your Texas liability coverage to pay expenses exceeding those covered by a Mexican liability policy. This endorsement covers trips of any distance and any length of time. Ask your agent which endorsements your insurance company offers. Coverage of New or Additional Automobiles If you buy a new or additional car, your policy may automatically cover it, but there are certain limitations. Read your policy carefully to know whether new or additional cars are automatically covered.
Be sure to notify your insurance company as soon as possible that you have added or replaced a car and which coverages you want. You could lose coverage on a new or additional car if you wait longer than 30 days. Shopping for Auto Insurance Rates vary widely among companies, so it pays to shop around. Following are some useful tips to help you find the best deal for your money:
Understanding RatesTexas law requires rates for insurance offered in Texas to be reasonable, adequate, not excessive to the risks for which they apply, and not unfairly discriminatory. Auto insurance companies in Texas set their own rates and then file them with TDI for review. Companies do not have to receive prior approval before putting their rates into effect, but if TDI determines that a company's filed rates are excessive, the company can be ordered to make refunds to consumers who were overcharged. Factors that Affect Your Premium Companies may use a number of criteria to establish your individual premium. These include:
Companies must file their underwriting guidelines with TDI and update them each time they make a change. Discounts and Surcharges Discounts can help you save money on your premium. Discounts vary by company. Following is a list of some of the discounts commonly available in Texas:
If you have a poor driving record, you can expect to pay more for your insurance. Companies may add surcharges to your premium -- some as high as 60 percent -- for the following:
Insurance on the Installment Plan TDI rules require all auto insurers to offer installment plans. Some companies only offer payment plans through premium finance companies, which usually charge high interest rates. Shopping smart for car insurance means you should seek not only low rates but also low-cost financing. Ask who will provide your installment plan. Look for insurance companies that offer their own installment arrangements. Ask about the down payment, the number of installments, interest or service charges, and the amount of your total monthly payment. Get premium quotes and installment plan information from several companies before you decide. Insurers and premium finance companies must give you terms at least as good as these:
Insurers and premium finance companies may offer even smaller down payments and more time to pay. An insurance company may add a service charge to your payment. The basic service charge is $3 per month, but the company can add 50 cents for every $250 (or fraction) of premium over $500. Premium Finance Companies Premium finance companies are specialized lenders that loan consumers money to pay their insurance premiums, often at high interest rates. Sometimes the only installment plan offered is through a premium finance company, which might be owned by the agent selling your policy. The insurance agent must tell you if your installment plan is with a premium finance company and must give you the premium finance company's name. Note: If you buy insurance through TAIPA, an agent who offers a premium finance company loan must give you a disclosure form comparing it with TAIPA's own installment plan. The form will show a side-by-side comparison of the premium finance company's payment plan and the TAIPA installment plan. The form will show fees, interest payments, and the amount you will pay under each plan. If you choose the premium finance company, you must sign this form as proof you made your choice after seeing the comparison. If you enter into a premium finance agreement with a premium finance company, you will pay the down payment to your agent or company. Be sure to get a receipt at the time of payment. The premium finance company pays the balance of your premium directly to the insurance company and then collects the amount financed, plus interest, from you in installments. Your loan agreement assigns your power of attorney to the premium finance company for payment transactions involving your policy. The premium finance company can go to the insurer and cancel your policy if you fall behind in your payments. If your policy is canceled for any reason, the premium refund goes to the premium finance company, which uses it to pay off your note. The premium finance company owes you a refund if any money is left over. The finance company must send your refund to you within 20 days after receiving it from the insurance company. A premium finance company must have a license from TDI. You can verify its license by calling TDI's Consumer Help Line. When dealing with a premium finance company, it's a good idea to
Losing Your InsuranceCompanies may cancel or nonrenew a policy for a variety of reasons. Cancellation means the company terminates your policy before it runs out. Nonrenewal means the company refuses to renew your policy when it expires. It's helpful to know your rights regarding cancellation and nonrenewal of your insurance. A company must explain in writing its reasons for declining, canceling, or not renewing your policy. This explanation must include
An insurance company may not cancel an auto policy that has been in effect for more than 60 days unless
However, during the first 60 days, the company may cancel a policy for any lawful reason, including a ticket or an accident. If the company cancels your policy because of an accident, it still must pay for covered damages resulting from the accident. The company must give you written notice at least 10 days before canceling your policy. If either you or the company cancels your policy, the company must refund any premiums paid in advance that did not buy coverage. This amount is called the "unearned premium." For example, if you paid a six-month premium of $600 and you cancel your policy after one month, the company owes you $500 in unearned premium. A company cannot refuse to renew your policy unless it has been in effect for at least 12 months. This means a six-month policy must be renewed to give you a full 12 months of coverage. The company must give you 30 days' notice before not renewing your policy. In Texas, a company cannot refuse to renew your policy because of
Sometimes an insurer will move you to another company in its company group. If a company moves you to another company within its group, it must give you 30 days' notice that your original policy will not be renewed. If the company fails to give you 30 days' notice, TDI can require the company to renew your policy for another year in your original company. If you get a nonrenewal or cancellation notice, it's a good idea to start shopping for new insurance immediately. You'll need to make sure that you keep your liability coverage uninterrupted to satisfy Texas' financial responsibility laws. Also, if you still owe money on your car, your lender will usually require you to maintain collision and comprehensive coverages without interruption. If you cancel or lose these coverages, your lender will buy single-interest automobile physical damage coverage and add the cost to your loan payment. It's expensive and protects only the lender. You may drop collision and comprehensive once you have paid off your car loan, but you should keep the coverages as long as you owe money on your car. Your Rights Against Unfair DiscriminationAn insurance company cannot deny, refuse to renew, limit, or charge more for coverage because of your race, color, religion, or national origin. A company also cannot deny, refuse to renew, limit, or charge more for coverage because of your age, gender, marital status, geographic location, disability, or partial disability unless the refusal, limitation, or higher rate is "based on sound underwriting or actuarial principles." This means the company would have to show valid evidence that you present a greater risk for a loss than others it is willing to insure. Also, a company cannot nonrenew your policy because someone in your family has reached driving age. In addition, a company cannot unfairly discriminate between individuals of the same rate or risk class in its rates, policy terms, benefits, or in any other manner unless the refusal, limitation, or higher rate is "based on sound actuarial principles." You may sue insurance companies for unfair discrimination, including denial of insurance. The suit must be filed in an Austin district court. However, if the court finds the suit groundless, in bad faith, or brought for the purpose of harassment, you may be ordered to pay the insurance company's legal expenses. Auto Insurance for "High Risk" DriversBeing labeled "high risk" makes it harder to get car insurance, particularly at favorable prices. Insurance companies often check motor vehicle records for your driving history and credit reports for your financial history before writing or renewing your policy. Owning a car built for speed also can label you as high risk. Many companies use the Comprehensive Loss Underwriting Exchange (CLUE®) to learn an applicant's insurance claims history. If the company based its decision to deny, cancel, or nonrenew you even partly on a CLUE® report, you can get a free copy by calling the ChoicePoint Consumer Center or visiting its website 1-800-456-6004 Before calling, get the CLUE® reference number from the company's denial letter or from the company. Using the reference number will speed the process and ensure you request the right report. Insurance Options for High-Risk Drivers
If you get auto insurance through TAIPA, your policy will provide basic liability insurance required by Texas law. You can add $2,500 worth of Personal Injury Protection and uninsured/underinsured motorist coverage. TAIPA doesn't provide collision or comprehensive insurance. Nor does it offer more liability coverage than the law requires. TAIPA policyholders who need collision, comprehensive, or more liability coverage should ask an agent for help finding a policy. TAIPA coverage costs more than most companies charge, but could be less than you would pay a county mutual. TAIPA policyholders must pay additional premiums, called surcharges, for traffic convictions. They also pay higher surcharges for accidents than other drivers. TDI rules encourage insurance companies to take policyholders out of TAIPA and insure them at lower rates after a year without tickets or accidents. The rules also require companies to offer cheaper "voluntary" policies to their TAIPA policyholders who have gone three years without tickets or accidents. To get coverage through TAIPA, apply through a licensed agent who will forward your application and first payment to TAIPA. You should receive a proof-of-insurance card by mail within 10 days. Only agents specifically certified by TAIPA may sell TAIPA policies. An agent who quotes you a premium higher than TAIPA's must tell you about TAIPA if you were previously uninsured and had no more than one accident and one ticket in the past three years. For more information about TAIPA, call 1-800-580-TAIP (8247) or After the Accident... What Now?Accident Checklist
If the other driver refuses to tell you his or her insurance company, get a copy of the police accident report. The accident report will list the other driver's name and insurance company. If the police did not investigate the accident, you can report the driver's refusal to the police. This could result in a report identifying the driver's insurance company. In addition, the Department of Public Safety keeps files of forms - called SR-22s - that show the insurance companies of people convicted of DWI or driving without insurance. DPS will advise you how to find out if the driver has an SR-22 on file and the name of his or her insurance company. You may also request the information by calling 512-424-2600 Accidents Caused by Other DriversIf you were in an accident caused by another driver, the other driver's insurance company should pay the following costs, up to the policy's limits:
If the other driver's insurance won't cover all your medical bills, you should file a claim for the difference against your Personal Injury Protection (PIP) coverage, if you have it. For amounts over that, you can claim against your uninsured/underinsured motorists (UM/UIM) coverage or your health insurance policy. If the other driver's policy won't cover all of your auto repairs, file a claim against your collision or UM/UIM coverage for the difference (minus your deductible) between the damage to your car and what the other driver's policy will pay. The other driver's insurance company may ask you to sign a release to settle your claim and forgo future claims related to the accident. Don't sign a release until you are satisfied with your total settlement. Get a letter from your doctor estimating the cost and length of your future medical treatment. You might want to consult an attorney before accepting a settlement. Under Texas law, you have two years after an accident to either settle your claim or file a lawsuit. Texas law prohibits insurance companies from delaying payment on a claim as a means to pressure you to sign a release. If you believe an insurance company is delaying payment to you so that you will sign a release, you should file a formal complaint with TDI. If the other driver denies fault, his or her insurance company may refuse to pay the claim. Independent witnesses could make a difference in getting the company to pay. It's important to get names, addresses, and telephone numbers of any witnesses to the accident. Make sure the insurance company knows about the witnesses. If the company continues to refuse to pay the claim, you can file a claim against your own insurance or you may have to go to court to resolve the issue. Before filing a claim against your own company, it's a good idea to talk to your agent or your company's underwriting department about how a claim might affect your rates on renewal. A company can raise your premium because of at-fault accidents. Also, a company cannot refuse to renew your policy solely because you had one accident that was not your fault in a 12-month period. However, if the accident affected your Texas Department of Public Safety driving record, your company may consider that in determining your rates, whether you made a claim on the accident or not. Getting Your Car Repaired Your insurance company will have an adjuster inspect your car and calculate an estimate for repairs or may ask that you provide repair estimates from mechanics and auto body shops. The insurance company will pay for repairs or replacement only up to the car's actual cash value. Actual cash value is the amount that your car would have sold for before the accident. An insurance company cannot require you to use a particular repair shop. In fact, insurance companies are required to notify you of your freedom-of-choice rights regarding auto repair shops and parts. On collision and comprehensive claims, however, your company is obligated to pay only for parts of "like kind and quality" to those that were damaged. If the repair estimates are more than your car is worth, the insurance company will likely "total" your car rather than pay to fix it. Insurance companies typically value your car by the National Automobile Dealers Association Used Car Guide or by a "market survey" showing average prices of various makes and models. The company's offer might not recognize your car's condition, special features, value on the local market, or may be less than what you owe on your car loan. In these instances, be prepared to negotiate with the insurance company to get what you believe is a fair deal. A company is more likely to raise its offer if you can show that your car would sell for a higher price in your area. Get written price quotes for a similar automobile from several used car dealers, or look in the classified section of your local newspaper for used car prices. Sometimes the insurance company may want to total your car, but you'd prefer to have it repaired instead. You can keep your car if you are willing to subtract its salvage value from the insurance settlement. First make sure the cost to repair the car will not exceed the car's actual cash value. To find out the salvage value, contact local salvage yards for estimates. Be sure to record the yard's telephone numbers and the names of the people you spoke with. If your insurance company totals your car but you can't reach an agreement on the amount to be paid, you can demand an appraisal. Appraisal allows you and the company to hire separate damage appraisers. The two appraisers choose a third appraiser to act as an umpire. The appraisers then review your claim, and the umpire rules on any disagreements. The appraisal decision is binding, but only as to the amount of the loss. If there is a dispute over what is covered, you can still pursue a settlement of the coverage issue after the appraisal takes place. You are required to pay for your appraiser and half of the umpire's costs. Appraisal is available only in disputes between you and your insurance company. It is not available if the other driver was at fault and you disagree with his or her company's offer. Getting a Rental Car If you have more than basic liability coverage or your accident was caused by another driver, you should be able to get a rental car while yours is being repaired:
Filing a Claim Once you have filed a claim, Texas law sets these deadlines for the insurance company to act:
A company that cannot meet these deadlines must send you a notice explaining why. The company then has 45 days to either approve or reject the claim. Note: This law does not apply if another driver's insurance company is paying the claim. However, the company is required to act in good faith and to make a prompt and fair settlement. If the insurance company rejects your claim, Texas law requires it to explain the rejection in writing. If the company claims that the loss isn't covered by your policy, ask to see the policy language that supports denial of your claim. A court usually will order the company to pay if the language is unclear and the policy reasonably could be read your way. Automobile Insurance for Young DriversYoung drivers must comply with the state's financial responsibility laws, just as older drivers do. Most young drivers, however, have the option of satisfying their legal requirements by being added to their parents' auto policy. Adding a young driver to a parents' policy can be expensive, but it's cheaper than taking out a separate auto policy. A parents' policy covers children living at home or away at school, even when not named on the policy. Even though children are automatically covered on their parents' policy, it's important that they be listed on the policy as soon as they reach driving age. Insurance companies are required to charge the correct rate, based on the classifications of the drivers in your family. 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 will bill you for the extra premium you should have paid. If you have children attending school away from home, tell your insurance company. Because rates are based on where a car is usually located, the insurance company may need to adjust your premium. If the school is in another state, it's a good idea to check on the financial responsibility laws in that state to make sure you have the appropriate coverages. When you add your children to your policy, they may be rated on the most expensive auto in your household. The rules for this are complex and address a variety of situations, however. Generally, if a teen-ager is the "principal driver" of a particular automobile, his or her rate will be based on that car. If not, the teen-age driver is assigned to the car (usually the most expensive) that produces the highest rate. Removing Your Children from Your Policy You may want to remove your children from your policy when they are no longer living with you. You'll probably have to prove to the insurance company that a young driver no longer lives at home, however. You can use documents like a driver's license, lease agreement, or utility receipts to prove that your child has moved. A remotely possible alternative would be a named driver exclusion added by mutual agreement between you and the insurer. It's probably not a good idea to remove your children from your policy who have moved because they are attending school away from home. An insurance company may require you to keep them on your policy, even if you would like to have them removed. Technically, you could remove your child from your policy with a "named driver exclusion" endorsement. Few companies will agree to this, however. Besides, it's risky to drop coverage when your teen-ager might occasionally drive at school or when home on visits. You can sometimes remove a teenaged driver from your policy by purchasing a non-owner policy. This usually is a bad idea. A non-owner policy merely provides additional liability insurance when driving a non-owned vehicle. If your teenager has an accident while driving your car, neither your policy nor the non-owner policy will pay for your vehicle's damage. You might also be unprotected financially if held liable for an accident caused by your minor child. Finally, if the non-owner policy is rated properly, your teenager's liability insurance might cost as much as or more than if he or she was on your policy. Saving Money on Insurance for Young Drivers Unfortunately, insuring young drivers is usually expensive. Some young drivers may qualify for discounts, however. If you are under 18, you must complete a driver training course approved by DPS to obtain a Texas driver's license. Many insurance companies give a 10 percent driver training credit for teenagers who complete driver education. Parent-taught drivers are eligible for 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 any discounts for young drivers. Getting HelpIf you have a problem with your insurance company, first try to resolve the problem yourself. Often disputes are the result of miscommunication. Talk to your agent or a company representative. Texas law requires most companies to have toll-free telephone lines for their policyholders. If you are unable to resolve the dispute, you can file a complaint with TDI. TDI will promptly notify the company of your complaint, ask for a detailed response, and then send you a copy of the response when it is received. The insurance specialist assigned to your complaint will send you an explanation of the outcome. Most complaints are completed in about 45 days. TDI has limited jurisdiction in some complaints. For instance, we can't resolve questions of fact and have no authority over third-party claims. However, even if we are unable to resolve your complaint, we may be able to bring about a more thorough review of the matter. In addition, your complaints and inquiries help TDI assist other Texans by identifying insurance companies and agents that should be investigated and helping determine the kinds of help consumers need most. For More Information or AssistanceFor answers to general insurance questions or for information on filing an insurance-related complaint, visit our website or call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday www.tdi.state.tx.us For printed copies of consumer publications, call the 24-hour Publications Order Line 1-800-599-SHOP (7467) Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line 1-888-327-8818 To report suspected arson or suspicious activity involving fires, call the State Fire Marshal´s 24-hour Arson Hot Line 1-877-4FIRE45 (434-7345) The information in this publication is current as of the revision date. Changes in laws and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an endorsement by TDI of any service, product, or company. For more information contact: ConsumerProtection@tdi.state.tx.us Last updated: 10/31/2006 |
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