Website SurveyAutomobile Insurance Made Easy(September 2009) Texas law requires people who drive in Texas to be able to pay for the accidents they cause. Most drivers do this by buying automobile liability insurance. Liability insurance pays to repair or replace the other driver’s car and pays other people’s medical expenses. It does not pay to repair or replace your car or for your injuries. 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 $25,000 for each injured person, up to a total of $50,000 per accident, and $25,000 for property damage per accident. This basic coverage is called “25/50/25” coverage. Because of car prices and the high cost of medical care, the minimum amounts might not be enough if you cause an accident. If your liability limits are too low to pay for all of the other driver’s costs, the driver may sue you to collect the difference. To protect yourself financially, 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 need to show proof of insurance when you
There are 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. The penalties for violating the state’s financial responsibility laws increase if you don’t have a valid driver’s license to a fine not to exceed $2,000, 180 days in jail, or both. The penalty increases to a fine not to exceed $4,000, one year in jail, or both if you case a car accident that results in serious injury or death. Know Your RightsTexas 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 CoveragesAutomobile insurance pays for damages, injuries, and other losses specifically covered by your policy. Read your policy carefully because coverages can vary by policy and company. Pay special attention to the exclusions section, which lists the things your policy doesn’t cover. 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. The following summarizes the eight coverages in the Texas Personal Automobile Policy. Although your coverages and policy terms may differ from these, this summary can help you understand various auto insurance coverages and the way they work. 1. Liability Coverage (Basic liability coverage meets the state’s financial responsibility requirement)Pays: Other people’s expenses for accidents caused by drivers covered by your policy, up to your policy’s dollar limits. These may include the other people’s
Liability insurance also pays your attorney fees if someone sues you because of the accident and bail up to $250 if you are arrested. Covers: You and your family members, "Family members" include anyone living in your home related to you by blood, marriage, or adoption, including your spouse, children, in-laws, adopted children, wards, and foster children. Other people driving your car with your permission, family members attending school away from home, and spouses living elsewhere during a martial separation also might be covered. You and your family members might be covered when driving someone else’s automobile – including a rental car – but not a car that you don’t own but have regular access to, such as a company car. Note: Some policies won’t cover other people, including family members, unless they’re specifically named in the policy. Your policy’s dec page should list the names of all of the people covered by the policy. 2. Medical Payments CoveragePays: Medical and funeral bills resulting from accidents, including those in which the other person is a pedestrian or bicyclist. 3. Personal Injury Protection (PIP) CoveragePays: Same as medical payments coverage, plus 80 percent of lost income and the cost of hiring a caregiver for an injured person. 4. Uninsured/Underinsured Motorist (UM/UIM) CoveragePays: 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. Also pays for accidents caused by a hit-and-run driver if you reported the accident promptly to police.
Covers: You, your family members, passengers in your car, and others driving your car with your permission. Insurers must offer UM/UIM coverage. If you don’t want it, you must reject it in writing. 5. Collision (Damage to Your Car) CoveragePays: 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. Covers: You, your family members, passengers in your car, and others driving your car with your permission. 6. Comprehensive (Physical Damage Other than Collision) CoveragePays: 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. If you still owe money on your car, your lender will require you to have collision and comprehensive coverage. 7. Towing and Labor CoveragePays: 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. 8. Rental Reimbursement CoveragePays: A set daily amount for a rental car if your car is stolen or is being repaired because of damage covered by your policy Other CoveragesStereo Equipment New or Additional Automobiles
Be sure to tell 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 an additional or replacement car if you wait longer than the number of days specified in your policy to notify your insurance company. Rental Cars 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 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 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 does not pay for your injuries or damage to the car you were driving. Driving in Other States, Canada, and MexicoA Texas automobile insurance policy usually meets the financial responsibility requirements of other U.S. states and Canada. Mexico, however, does not recognize U.S. auto liability policies. Mexican authorities can 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 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. 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. In addition, these endorsements might not meet Mexican legal requirements. You can buy Mexican liability insurance from Texas agents who specialize in it. 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. You may be able to buy a Mexico “tourist” endorsement for your U.S. 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. Auto Insurance for Young DriversParents can usually add their young drivers to their auto policy to satisfy the state’s financial responsibility requirements. Adding a young driver to a parents’ policy can be expensive, but it’s cheaper than buying a separate auto policy. Some policies require all drivers to be named on the policy for coverage to apply. Therefore, it’s important that you list all family members on the policy as soon as they reach driving age. 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 and could deny your claim and coverage. If you have children attending school away from home, 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 appropriate coverages. Generally, if a teenager is the principal driver of a particular automobile, the company will base the teen’s rate on that car. Otherwise, the company will assign the teenage driver to the car (usually the most expensive) in your household that produces the highest rate. Removing Your Children from Your PolicyYou may want to remove your children from 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 separate address. It’s probably not a good idea to remove children from your policy if they are attending school away from home. 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. 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 be 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 discounts. Auto Insurance for ‘High Risk’ DriversBefore writing or renewing a policy, insurance companies determine your risk for an accident by checking motor vehicle records for your driving history. Some companies might also review your credit history. Many companies use the Comprehensive Loss Underwriting Exchange (CLUE) to learn an applicant’s insurance claims history. If the company used a CLUE report to deny, cancel, or nonrenew your policy, you can get a free copy by calling the ChoicePoint Consumer Center or by visiting the ChoicePoint website
Before calling, get the CLUE reference number from the insurance company. Using the reference number will speed the process and ensure that you request the right report. Insurance Options for High-Risk Drivers
TAIPA only provides the basic liability insurance required by Texas law. It doesn’t provide collision or comprehensive coverage or higher liability limits than the law requires. You can add personal injury protection (the minimum limit is $2,500) and uninsured/underinsured motorist coverage. TAIPA coverage costs more than coverage from most other companies. TAIPA policyholders pay additional premiums, called surcharges, for traffic convictions. They also pay higher surcharges than other drivers pay for accidents. 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 TAIPA coverage, apply with a licensed insurance agent (not TAIPA). 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 previous three years. Steps to Take After an Accident
* If the other driver refuses to tell you the name of his or her insurance company, get a copy of the police accident report. The accident report should 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 police. This could result in a report identifying the driver’s insurance company. In addition, the Texas 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. Call the DPS Customer Service Bureau
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, file a claim for the difference against your Personal Injury Protection (PIP) coverage, if you have it. For amounts greater than 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. Settling the ClaimThe 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 the 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 of a claim in order to pressure you to sign a release. If you believe an insurance company is delaying payment to pressure you, file a 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 with your company, ask your agent or your company’s underwriting department how a claim might affect your rates on renewal. A company cannot refuse to renew your policy solely because you had one accident in a 12-month period that was not your fault. However, if the accident affected your DPS driving record, your company may consider it in determining your rates, whether you filed a claim for the accident or not. Getting Your Car RepairedYour insurance company will either have an adjuster inspect your car and give you a repair estimate, or it will ask that you provide repair estimates from mechanics and auto body shops. Insurance companies will pay for repairs or replacement only up to the car’s actual cash value. Actual cash value is the amount your car would be worth if it weren’t damaged. If you and your insurance company can’t agree on the amount of your settlement, 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 review your claim, and the umpire rules on any disagreements. The appraisal decision is binding as to the amount of the loss. If there is a dispute about what is covered, you can pursue a settlement of the coverage issue after the appraisal. You must 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. Some companies may give you a list of “preferred” shops once you begin to repair your car, but they cannot require you to use a particular repair shop. For collision and comprehensive claims, your company is obligated to pay only for parts of “like kind and quality” to those that were damaged. Totaling a CarIf the repair estimates are more than your car is worth, the insurance company will likely “total” your car and pay you its actual cash value rather than pay to fix it. Insurance companies typically use the National Automobile Dealers Association’s Used Car Guide to determine the value of your car. The company’s offer might not recognize your car’s condition, special features, or value on the local market. Be prepared to negotiate with the company to get what you believe is a fair deal. A company might 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. If you’d prefer to have your vehicle repaired instead of totaled, you can keep your car if you are willing to subtract its salvage value from the insurance settlement. 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. Getting a Rental CarIf you have more than basic liability coverage or another driver caused your accident, you should be able to get a rental car while yours is in the shop.
Filing a ClaimOnce you have filed a claim, Texas law sets 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 your claim. Note: The prompt payment 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. 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 notify the company of your complaint, ask for a detailed response, and send you a copy of the company’s response. The insurance specialist assigned to your complaint will send you an explanation of the outcome, usually within 45 days of receiving your complaint. TDI has limited jurisdiction in some complaints. For instance, we can’t resolve questions of fact or determine who is at fault in an accident. These issues generally must be resolved in court. Even when TDI’s jurisdiction is limited, our involvement may encourage the company to review your issue more thoroughly. In addition, your complaints and inquiries help TDI assist other Texans by identifying potential problems with insurance companies and agents. Shopping for Auto InsuranceRates vary widely among companies, so it pays to shop around. The following tips can help you find the best deal for your money:
You can learn more about a company, including its license status, complaint history, and financial rating from an independent rating organization, by calling TDI’s Consumer Help Line or by visiting our website
Understanding RatesTexas law requires insurance rates to be reasonable, adequate, not discriminatory, and not excessive to the risks for which they apply. Auto insurance companies in Texas set their own rates and file them with TDI for review. Companies do not have to receive prior approval before using their rates, but if TDI determines that a company’s filed rates are excessive, it can order the company to make refunds. Factors that Affect Your PremiumCompanies may use a number of criteria to establish your premium. These include:
Companies must file their underwriting guidelines with TDI and update them each time they make a change. Discounts and SurchargesDiscounts 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:
Losing Your InsuranceCompanies may cancel or nonrenew a policy for a variety of reasons. Cancellation means the company terminates your policy before its expiration date. Nonrenewal means the company refuses to renew your policy when it expires. A company must explain in writing its reasons for declining, canceling, or not renewing your policy. This explanation must include the incident or risk factor that violated the company’s underwriting guidelines and the insurer’s sources of information. An insurance company may not cancel an auto policy that has been in effect for more than 60 days unless
During the first 60 days you have a policy, a company may cancel it 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 send you a written notice at least 10 days before canceling your policy. If either you or the company cancels your policy, the company must refund you any “unearned premium”. Unearned premium is the amount you paid in advance that did not actually buy coverage. 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, minus any applicable agent or policy fees. A company cannot refuse to renew your policy unless it has been in effect for at least 12 months. This means a company must renew a six-month policy 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, it must give you 30 days’ notice that it will not renew your original policy. If the company fails to give you 30 days’ notice, TDI can require the company to renew your policy for another year with your original company. If you get a nonrenewal or cancellation notice, start shopping for new insurance immediately. Make sure you keep your liability coverage uninterrupted to satisfy Texas’ financial responsibility laws. 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. This coverage is expensive and protects only the lender. 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 other people it is willing to insure. A company cannot nonrenew your policy because someone in your family has reached driving age. In addition, a company cannot 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. You must file the suit in a Travis County district court. However, if the court finds the suit groundless, in bad faith, or brought for the purpose of harassment, the court could order you to pay the insurance company’s legal expenses. For More Information or AssistanceFor answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website
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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: |