Automobile Accident: What to Know About Insurance
Here, learn key information to help you buy insurance and get the most common discounts.
Special thanks to the Texas Department of Insurance. An earlier version of this article was excerpted from its website.
Automobile Insurance Made Easy
Texas law requires auto liability insurance so people who can pay for the accidents they cause.
When an accident is your fault, liability insurance pays to fix or replace the other driver's car and helps to pay their medical expenses. Texas minimum liability insurance is called “30/60/25 coverage.” For each accident, there is $30,000 for each injured person, up to $60,000 per accident, and up to $25,000 for property damage per accident.
It is good to buy more than the minimum because anytime the insurance is not enough to pay for the damage, the other driver can sue you for the rest.
Many people don’t realize that liability insurance only pays for the other person’s car and injuries, not yours. You can cover yourself by adding insurance such as personal injury protection (PIP), uninsured or underinsured motorist, medical payments, collision, and comprehensive insurance.
When do I need proof of insurance?
Every auto policy has a proof-of-insurance card to use when:
- police ask for it
- you have an accident,
- you register your car
- you get or renew your driver's license, and
- you get a car inspection.
How does the insurance company decide how much I pay?
Insurance companies calculate your bill with information like:
- Your driving record: they look at how many tickets and accidents you have.
- Your credit score: your payment habits and amount you owe.
- The zip code where you keep your car: the crime rate makes your insurance go up.
- Using the car for business or personal use: normal use is covered, but if you use your car to make money with "gig economy" jobs like ride-hailing and delivery apps, many companies make you buy a different policy.
Can I get discounts?
Of course. Insurance companies offer discounts for things that increase business and decrease payouts for accidents and injuries. A few popular discounts are:
- Bundling policies: buying more than one policy to cover your car, RV, motorcycle, home, life, or a combination of these.
- Good driver: Few or no tickets and accidents for two to five years.
- Driving habits: drivers can agree to put a tracking device in their cars for 30 to 90 days to show they are good drivers.
- Vehicle safety: anti-lock brakes, airbags, and daytime running lights lower the chance of accidents and injuries.
- Good student: children with at least a B average are eligible.
- Processing: paperless billing saves trees and postage.
- Pay in full: pay upfront instead of making monthly payments
- Early bird renewal: pricing for new coverage 10 or more days before your insurance expires.
Why is the declaration page important?
The declaration page or the front page of your policy lists important information like your insurance company name, your policy number, the amounts for each type of coverage, and the deductible you have to pay.
What are the most common types of insurance I will see?
Insurance is grouped by what type of protection it gives you.
- Liability: covers damage to the other person’s car.
- Collision: covers damage to your car.
- Comprehensive: covers damage from weather, theft, and vandalism.
- Uninsured: covers you when the other person has no insurance.
- Underinsured: covers you when the other person does not have enough insurance.
- Other: additional coverages include Personal Injury Protection (PIP) for medical bills (usually up to $2,500) towing, and car rental.
What is a deductible?
The deductible is what you pay before the insurance company will pay. If the damage is $1,000 and your deductible is $250, you have to pay your part before they pay the remaining $750.
Does auto insurance cover everything?
No. It usually covers you, your family, and any person you give permission to drive your car. Your insurance also covers common things like car repair or replacement, medical expenses, rental cars, towing, and court costs.
Things not covered are called limitations or exclusions, and these are definitions for terms you might find on your policy:
- Acts of God: Freak accidents and extreme weather.
- Driving for Commercial Use: If you use your car to make money, regular insurance will not cover anything that happens while you are doing business. You have to buy special insurance for that.
- Excluded driver: People specifically listed who will not be covered.
- Illegal Activity: Committing crimes.
- Intentional acts: Things done on purpose to try to get the insurance to pay.
- International Travel: Driving across U.S. borders is not covered. So, the owner will have to buy extra insurance for that trip.
- Named driver: The person who is listed on the policy.
- Racing: If you use your car in a racing event, the insurance will not pay for it.
What about teen drivers?
Teen drivers can be added to your policy, or you can buy them a policy of their own. Adding them on to your policy is usually cheaper. Make sure you let the insurance company know if you have a teen that is 16 years old and driving, otherwise they won’t cover any accidents by that teen and they could charge you for the insurance amount you should have paid up front.
Does age really matter?
Yes. Insurance companies know that younger drivers take more risks and have more accidents. So, they often charge more for younger drivers and less as you get older. The average 18-year-old can pay about 65% more for insurance than a 30-year-old with a good driving record.
Do I have any special rights?
Texas grants you specific rights listed in the Consumer Bill of Rights for auto insurance. When you buy car insurance, the insurance company has to send you a copy with your policy, so you know all your rights.
For More Information
See Automobile Insurance Guide from the Texas Department of Insurance.
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