Auto insurance is a big topic and one that people have a lot of questions about in general. Additionally, the topic of auto insurance can seem very confusing, with lots of small legal type and disclaimers that can be hard to decipher.
It’s important to note that, in Texas, having auto insurance is not optional. It is required by state law. But, it is required in Texas. For this reason, it’s a topic that every driver should have a basic understanding of, at least regarding the various types of insurance and, and which ones you should consider.
In this blog post, we’ll give a high-level overview of five types of auto insurance you should consider having in Texas.
1. Liability Insurance
The first type of auto insurance we’ll cover is Liability insurance, and this type is required for all drivers in Texas. Liability coverage pays for property damage and/or injuries to another person caused by an accident in which you’re at fault.
Basically, liability coverage is broken down into two types: property damage and bodily injury.
Property damage coverage pays for any damage that happens to another person’s vehicle. Bodily injury coverage covers payment for others who are injured in an accident.
Essentially, the protection your liability coverage offers is based on how much you want to pay for the policy. The minimum amount of liability coverage you must have in Texas is what’s known as 30, 60, 25. This means coverage of $30,000 for the other person’s injuries with $60,000 as the maximum amount that will be paid for all injuries. The 25 is for the bare minimum of property accident coverage, $25,000.
One note, even though liability insurance is required by law in Texas, it’s estimated that 20% of drivers on Texas roadways don’t have insurance.
It’s important to note that if you are actually caught without having liability insurance, meaning if you cause an accident, you can actually be fined up to a thousand dollars. Your license could be suspended for two years. And depending on how many times this has happened, you could be fined $4,000 and even spend a whole year in jail. So the importance of having liability insurance can’t be overstated.
2. Uninsured Motorist and Underinsured Motorist
While liability insurance is required by Texas law, Uninsured (UM) and Underinsured (UIM) motorist insurance is not required in Texas, but it is highly recommended you have it. UM/UIM insurance kicks in and covers you in the instance you are in an accident with someone that doesn’t have liability insurance.
As a general rule, UM/UIM insurance is not very costly, and it can save you a lot of money if you’re hit by an uninsured driver and put in the position of paying for your own repairs and medical bills.
Also, Texas is one state that allows “stacking” for UM/UIM insurance policies. This means you can combine coverage limits if you insure multiple vehicles. For example, you insure two vehicles on the same policy and have uninsured motorist coverage limits of $25,000 on each vehicle. Under Texas law, you can stack your coverage in that policy, increasing your Uninsured Motorist limits to $50,000 per accident.
3. Personal Injury Protection (PIP)
This type of auto insurance is intended to help pay for your medical bills. Most insurance agents have to offer up to $2,500 of Personal Injury Protection insurance, and unless you decide to reject it, you get three years to use it and it actually covers 80% of your lost wages if you’re out of work due to injuries.
While the minimum in Texas for PIP is $2,500, it can actually step up to $5,000, $10,000, and some insurance agencies even offer up to $100,000 worth of PIP.
MedPay is similar to PIP in that it covers costs for injuries and medical treatments. Note that MedPay is an alternative to PIP, you won’t have both MedPay and PIP insurance on the same policy.
In most cases, it’s probably best to choose PIP over MedPay because MedPay policies are less flexible. For example, with PIP, you have three years to file a claim. With MedPay, you have about a year. Also, MedPay does not cover lost wages and doesn’t allow for chiropractic treatment.
And perhaps one of the most important reasons to choose PIP over MedPay is that MedPay has to be paid back, while PIP does not. In cases where a settlement is reached, having to pay back MedPay can reduce the amount awarded in a settlement after MedPay expenses are reimbursed.
But in a situation where PIP is not offered, it’s always best to choose MedPay.
5. Gap Insurance
The moment you drive a new car off the lot, your car loses its value. In fact, most cars lose up to 20% of their value within the first year of purchase. Gap insurance covers the difference between what a vehicle is worth (the amount your standard insurance will cover) and the amount you actually owe on the car.
For example, if the blue book value (the amount the insurance company will use to determine the value of your car) is $30,000 and the amount you actually still owe on the vehicle loan is $10,000 (a $40,000 total value), Gap coverage will pick up the extra $10,000 amount due.
In certain situations, such as where you’ve made less than a 20 percent down payment, where you’ve financed for 60 months or longer, or where you’ve eased the vehicle, purchasing Gap insurance is generally a very good idea.
While auto insurance can be a very confusing and complex topic, because it is required in the state of Texas, it’s a good idea to know as much about basic auto insurance as possible.
These five types of auto insurance are good places to start to make sure you’ve got the maximum amount of coverage in the instance you’re in an auto accident in Texas.
And, it’s always a good idea to contact a personal injury lawyer for a free consultation to learn more about your rights and auto insurance, especially if you’ve been injured in an accident.