Last week a customer of ours asked to sit down with me to go over her policy. For purposes of privacy, we’ll call her Joan. Joan came into the office concerned about an accident she had been involved in a week or so prior. Fortunately there were no injuries from the accident. However, Joan was very hurt to find out that she did not have full coverage. Those were Joan’s words, not mine. She made a police report (the police came to the scene) and she called her insurance company to make them aware. For someone who had never had an accident, she was doing a great job. Joan had stated that the other driver had run into her car and the police report showed the same scenario, so far so good. While communicating with her insurance provider, Joan was unfortunately informed that she did not have rental car coverage. So because of that she was forced to find rides and or walk until the responsible party’s insurance took over and put her in a rental. Now that’s a pretty hard blow to take for someone that has been paying for auto insurance for 2 plus years. The whole time thinking she had (that word again) full coverage. Which brings me around to where I was going, full coverage is a dirty word. If you search the web you will find many different thoughts on the word full coverage, especially as it pertains to auto insurance. That I believe is where it is used mostly in our daily lives. However, in my personal opinion it does not exist. It’s like Sasquatch, some say they’ve seen it, most have heard of it, but now one as ever proved it. I say the dirty word of insurance is the same thing. If you’ve seen it, let me know. Give me a scenario and I’ll debunk it. It’s impossible to cover someone for any and every possible thing that could occur. Back to the word (FULL COVERAGE), I guarantee a sales guy came up with that word way back when. But in 1898 when the first auto policy was supposedly sold, I feel pretty confident they didn’t tell the customer…thank you for buying full coverage. So the next time you do business with an insurance agent and they offer you full coverage, do yourself, the agent and me a favor and set them straight. There’s no such thing as FULL COVERAGE!
Today’s customer is driven by many variables but when it’s about insurance, the #1 concern is usually price. How many times have you heard this? Agent: welcome to our insurance office, how may I help you? Customer: I’d like to get a quote. Agent: Ok, for auto insurance or …. Customer: yes auto. Agent: Are you looking for liability or full coverage? Customer: Full coverage. Agent: Ok, what’s your name?….and on and on and on. Once a rate is given and if received with approval, the agent will finalize the policy, collect the down payment, have the customer sign the application forms and issue the I.D cards. From that point on, you (the customer) believe you have FULL COVERAGE. That is until the loss occurs. Below I’m going to give you some basic auto insurance coverage info. Do yourself a favor and ask questions. It will never hurt you to ask before you buy but it very well might afterwards when it may already be too late. Your insurance agent should be your guide to protecting your family so select your agency carefully.
Here is a detailed list of coverage’s as found on the Texas Department of Insurance website. I feel like my personal description of coverage’s afforded to any Texas Automobile Insurance Policy may lack some overall detail you may need or desire. So I have taken some info directly from the horse’s mouth (TDI). Hopefully this will help you in your quest to find the coverage that best fits you and your family’s needs.
Automobile Insurance Made Easy
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’re 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. Other types of coverages such as personal injury protection, uninsured or underinsured motorist, medical payments, collision, and comprehensive - can help you 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, and
- have your car inspected.
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 are 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.
- 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 may sell other policies that the Texas Department of Insurance has approved. Some of these policies have more limited coverage. The following summary can help you understand the eight basic auto coverages (please note that your coverages may be different, depending on the type of policy you buy):
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; and
- car rental while the other driver's car is being repaired.
Liability insurance also pays your defense costs, including 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 separation are 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 provide only liability coverage when you drive a car you don’t own. Physical damage coverage for damage to the unowned vehicle might not transfer. Ask your agent before renting a car or driving a car you don’t own or lease.
Some policies – called named driver policies -- won't cover people who live with you, including family members, unless they're specifically named in the policy. For these policies, the declarations page must list the names 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 coverage.
What it pays: The cost of repairing or replacing your car after an accident. You’ll get the amount of your car's actual cash value, the amount to repair or replace the car, or the amount shown on the declaration page, whichever is less. Actual cash value is the current cost to replace your car, minus depreciation.
Who it covers: You, your family members, and anyone else insured under your policy.
3. Comprehensive (other than collision) Coverage
If you still owe money on your car, your lender will require you to have comprehensive coverage.
What it pays: The cost of replacing or repairing your car if it’s stolen or damaged by fire, vandalism, hail, falling objects, or an event other than a collision. Comprehensive coverage might pay for a rental car. Your policy won't pay to replace a stolen car unless you report the theft to police.
Payment is limited to your car's actual cash value, minus your deductible.
4. Medical Payments Coverage
What it pays: Medical and funeral bills resulting from an accident.
Who it covers: You, your family members, passengers in your car, and other injured people, including bicyclists and pedestrians, regardless of who caused the accident.
5. Personal Injury Protection (PIP) Coverage
What it pays: Similar to 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, and other injured people, regardless of who caused the accident.
Your insurance company will automatically give you PIP coverage, but you may reject it in writing if you don’t want it. The company must offer you $2,500 in PIP, but you can buy more.
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 a mandatory $250 deductible for property damage. This means you must pay the first $250 of the expenses yourself before the company will 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 rental reimbursement if your car was damaged by something - such as fire or theft - that your policy covers.
You can buy other coverages to add or expand coverage.
Your policy might not pay to replace CDs, MP3 players, cell phones, or stereo equipment not installed in your car.
New or Additional Cars
If you buy another car, your policy will automatically cover it with limitations.
Insurance companies must give additional cars the same amount of coverage as your car with the most coverage. For example, let’s say you have two cars - one with liability coverage only and one with liability, collision, and comprehensive coverages. If you buy a third car, it will automatically have liability, collision, and comprehensive coverage.
Insurance companies must give replacement cars the same coverage as the car it replaced. For example, if you trade in an older car that had only liability coverage, the new car will automatically have only liability coverage.
Be sure to tell your insurance company within 20 days if you buy a new car. You could lose coverage on an additional or replacement car if you wait longer to tell your insurance company.
Rental car agencies offer collision damage waivers and liability policies. The collision damage waiver isn't insurance. It’s an agreement that the rental company won't, with some exceptions, make you pay for any damage to a car you rent.
If you have auto insurance, your policy might 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’ll 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 a car often, you can buy a nonowner liability policy. A nonowner policy pays for damages and injuries you cause to others when driving a borrowed car, but it doesn't pay for your injuries or damage to the car you’re driving. Some policies provide only liability coverage on a rental car.
Once again, feel free to go to tdi.gov for more information, or feel free to call my office(s) for more information that may help you make a decision to best serve your needs. Remember, the next time your agent asks you if you want full coverage, feel free to set them straight. There’s no such thing as full coverage!
See you next time!
Always trying to stay local,
David (Big Red) Gorman