Car Insurance

Understanding Texas Car Insurance Policy Limits

Will an insurance company pay for all the damages associated with your accident? It depends. One of the things it depends on is the policy limits on the at-fault driver’s auto insurance policy. 

They are only bound to pay up to the limit, even if your expenses are well in excess of the limit. You must understand these limits, how to protect yourself financially, and what your options are.

Types of Auto Insurance Available in Texas

Auto insurance policies can be comprised of eight different types of coverages. Each offers very specific parameters on what they will and won’t cover.

Liability Coverage

Liability is the part of the policy that pays for damages when you are the at-fault driver. It’s also the part of the other driver’s insurance that will be paying you, should the other driver be at fault instead. 

Collision Coverage

Collision insurance pays when you have to repair or replace your car after an accident. Note this type of coverage doesn’t handle instances where the car needs to be repaired or replaced for other reasons.

Comprehensive

Don’t be misled by the title. “Comprehensive” does not mean “covers you for everything.” This is the coverage that will cover you when your car needs to be repaired or replaced as a result of criminal activity, or due to severe weather. It does not cover any other type of damage.

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Medical Payments

On an auto insurance policy this type of coverage pays for medical bills that your health insurance policy doesn’t cover. Thus, it can help bridge the gap when you exceed your health policy limits, or it can pay your deductibles and copays. It covers you and your passengers. It also covers you if you are injured while cycling or while you were a pedestrian.

Personal Injury Protection (PIP)

This type of coverage will also contribute to paying medical bills, but it goes much further. PIP insurance also covers your lost wages after an accident, as well as other non-medical costs. 

Uninsured/Underinsured

This is the coverage that helps you when you get into an accident with an uninsured driver, or with a driver whose normal policy limits don’t cover all of your damages.

Towing & Roadside Assistance

This one is self-explanatory. It covers you whether you need a tow due to an accident, or when you drive over a nail and have to replace a tire.  

Rental Reimbursement

Pays for any rental cars you use while waiting for your car to be repaired or replaced. 

Texas Minimum Car Insurance Requirements

The only coverage Texas law requires you to have is liability coverage, up to the following limits:

  • $30,000 per person.
  • $60,000 per accident.
  • $25,000 for property damage.

The “person” covers injury to another person. “Accident” coverage is the most the policy will pay if multiple people are injured.  $25,000 is for property damage, i.e., the other person’s car. 

You don’t strictly have to insure against your own loss, at least, not for the sake of following Texas law. Most people have collision and comprehensive insurance anyway, as most people lease or finance their vehicles. Financing companies usually demand this level of insurance while you make payments. You’re free to drop it after you own your car outright, but you might not want to, since it could mean you don’t have a way to replace your car in the event you are the one at fault for an accident.

How Car Insurance Policy Limits Work

Limits tell you the maximum amount an insurance company will pay out in certain instances. For example, if the cost of replacing your car is $30,000, then the other driver’s company would only be responsible for paying you $25,000 of that. The other $5,000 would have to come from somewhere else, or you’d have to get a car that is worth a little less. 

The same is true regardless of the damages. If the car is a $96,000 car the liability policy will still pay just $25,000. That may be when you make a claim against your own uninsured/underinsured policy, at which point your insurance company will pay the $5,000 difference.

A lawsuit will not bind the insurance company to payments that are above the policy limits. 

Protecting Yourself Financially

The smartest thing you can do is to get all eight forms of insurance coverage, especially medical payments, PIP, and uninsured/underinsured motorist coverage. With these types of policies in place you should have enough coverage to handle your economic losses, regardless of what kinds of coverage the other driver had at the time of the accident.

This might raise your payments a little, but it might be well worth it if you’re the one that ends up rear-ending someone. 

What if the other driver doesn’t have insurance?

If the other driver doesn’t have insurance, they likely don’t have the money to pay for your losses. If they do have insurance but it’s not enough to cover your losses, what do you do? The first thing to do is to look at your own policy. If you have uninsured motorist coverage (which we highly recommend), it may cover the difference.

Another option is to sue the other driver directly. Before you do, you and your attorney should look into the other driver’s assets. You only want to go through the time and expense of launching this kind of lawsuit if you think you have a chance of recovering the damages. Some drivers just don’t have any assets, which means you won’t recover even a portion of that money.

The other is to ask your attorney whether it’s possible to get the insurance company to pay out from a different coverage, like the other driver’s medical payments or PIP policy. Much may depend on how the driver’s policy was written, but it’s not impossible to obtain money this way.

Finally, you might just choose to pay the difference, recognizing that the insurance company is only responsible for paying for the coverage you purchased.

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