Auto Insurance protects an insured from financial losses in case of having an accident. There are six different types of coverages provided by an auto policy: liability, uninsured/underinsured motorist, PIP/medical, collision, comprehensive, transportation expenses, towing & labor costs. Most auto policies are sold for 6 month periods, but there are some carriers that sell them on an annual basis.
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Primary rating factors affecting premium are age, sex, marital status, territory, use of the auto, good student discount, driver education credit. Other rating factors include driving record, type of vehicle, number of vehicles, deductibles, liability limits.
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How to Save Money on Auto Insurance – there are different ways to reduce your auto premium:
- Keep a clean driving record
- Maintain a good credit history
- Ask for discounts/credits you qualify for such as anti-theft devices, airbags, defensive driving courses, clean driving record for a number of years, senior citizen, home owner
- Reduce coverage on older autos to assume more risk
- Ask for higher collision/comprehensive deductible
- Shop around by calling an independent insurance agent, who represents several auto carriers, to compare prices
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Financial Responsibility Law requires motorists, under certain circumstances, to provide proof that they have the ability to pay, up to certain minimum amounts, for damage or injury that they might cause as a result of operating a vehicle.
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Compulsory Auto Insurance Law requires the owners or operators of automobiles to carry automobile liability insurance at least equal to certain minimum limits before the vehicle can be licensed or registered.
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Bodily Injury – bodily harm, sickness, or disease, includes death that results.
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Property Damage is physical injury to or destruction of tangible property. It also includes loss of use of tangible property.
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Single Limit is the maximum amount an insurer will pay for the insured’s liability for both bodily injury and property damage per accident.
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Split Limits are the maximum amounts a personal auto policy insurer will pay for the insured’s liability for bodily injury per person, bodily injury per accident, and property damage per accident.
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Liability Coverage pays for other people’s expenses as a result of an accident caused by drivers covered by your policy, up to the policy limits. These expenses include car repair or property damage, medical and funeral costs, lost wages, punitive damages, compensation for pain & suffering, auto rental for other driver’s car while being repaired, your attorney fees. In Texas, the minimum liability limit requirement is 25/50/25.
Excluded from liability coverage are:
- Intentional injury
- Damage to the insured’s own property
- Non-owned property in the care of the insured
- Bodily injury to an employee of the insured
- Bodily injury or property damage when the vehicle is being used as a public or livery conveyance
- Claims arising out of the use of the auto by someone in the garage business
- Claims relating to the preparation or use a vehicle where speed contests are held
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Uninsured Motorists Coverage provides a source of recovery for occupants of a covered auto or for qualifying pedestrians who are injured in an accident caused by an at-fault motorist who does not have bodily injury liability insurance or has insurance but not enough to pay all of the insured’s damages, by a hit-and-run driver, or by a driver whose insurer is insolvent. Bodily injury UM/UIM pays without deductible. Property damage UM/UIM pays with an automatic deductible of $250, and it also pays for rental car.
In Texas, rejection of this coverage must be in writing.
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Medical Payment pays benefits, regardless of who is at fault, for medical and funeral expenses resulting from bodily injury to occupants of a covered auto because of an auto accident.
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Personal Injury Protection pays benefits, regardless of who is at fault, for medical expenses, loss of income, loss of services, and funeral expenses resulting from bodily injury to occupants of a covered auto because of an auto accident. In Texas, rejection of this coverage must be in writing.
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Collision Coverage pays for repairing or replacing your car after an accident. The payment is limited to the market value (actual cash value) of your car minus the deductible. If you still owe money on your car, your lender will require you to have this coverage.
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Comprehensive Coverage pays for repairing or replacing your car if it is stolen or damaged by a peril other than collision (like fire, vandalism, hail, flood, hit by a projectile). It also pays for a rental car if your car is stolen. Auto theft must be reported to the police in order to be covered.
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Transportation Expenses is additional coverage that reimburses up to a certain amount per day, to a maximum limit (typically $600) for temporary travel expenses for each covered physical damage loss.
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Under Towing and Labor Costs coverage, the insurer pays for towing and labor costs when a covered auto or non-owned auto is disabled, up to some stated amount such as $50 or $75. The cost of labor is covered only when it is performed at the place of disablement. Labor costs for work done at a service station or garage are not covered, even if the disabled vehicle is first towed there.
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Note: Information provided at this Learning Center is extracted from various text books written by the American Institute for Chartered Property Casualty Underwriters (AICPCU) and from the Texas Department of Insurance (TDI).