AUTOMOBILE INSURANCE COVERAGE
There are several different types of automobile insurance coverage. The most important types of coverage include: Liability Coverage, Uninsured/Underinsured Motorist Coverage, (PIP) Personal Injury Protection,
and Collision Coverage. We will explain each of them and detail who is covered by each policy provision.
A. LIABILITY COVERAGE
This type of coverage is the minimum coverage required by Texas State law. The agreement between the insured and the insurer (insurance company) provides for coverage of “bodily injury and property damage for which any covered person becomes legally responsible because of an auto accident” The minimum policy limits are $20,000/$40,000. This means that the limit of bodily injury covered by a standard liability policy is a maximum of $20,000 per person and $40,000 per accident, if more than one person was injured. Please note that the policy may be larger such as $50,000/$100,000 or $100,000/$300,000 and so on.
In order to better understand this particular type of coverage, there are some terms that must be clarified.
- Covered Person
The definition of a covered person is the insured, his or her spouse and any “family member” or other qualified claimant.
- Family Member
The definition of a family member is any person “who is a resident of your household and related to you by blood, marriage or adoption.
- Auto Accident
A situation where “… one or more vehicles are involved in some type of collision or near collision with another vehicle, object or person. State Farm Mut. Ins, Co. v. Peck, 900 S,W.2d 910 (Tex. App.-Amarillo 1995, no writ).
- Legally Responsible
The term “legally responsible” is most commonly associated with the at-fault party’s liability as determined by (a) his insurance policy provisions, or (b) a court of competent jurisdiction, or (c) the statutes of the jurisdiction where the accident happened.
B. UNINSURED/UNDERINSURED MOTORIST
Generally, both of these types of coverage are for the purpose of covering bodily injuries and property damages sustained in an accident where the at-fault party does not carry liability insurance coverage or the liability coverage is not adequate to pay the damages.
In order to recover under the Uninsured/Underinsured policy the covered person must not be found to be completely at fault If the covered person is at fault, the claimant will be unable to submit a claim under this coverage.
It is also necessary that the amount of bodily injury insurance coverage of the at-fault driver is less than the amount of bodily injury that is suffered by the covered person. For example, if your bodily injury claim is $15,000, and the at-fault driver’s liability policy is the standard $20,000 per person/$40,000 per occurrence policy, you will not be able to recover under your UIM policy. If your bodily injury claim is $25,000 under the same circumstances, you would be able to collect up to an additional $5,000.
- If you have this coverage, it would go into effect if the at-fault driver has no insurance or if the driver’s insurance company denies coverage under the at-fault driver’s policy.
- This coverage will apply if you are a victim of a hit-and-run accident and there was contact between the at-fault driver’s vehicle and your vehicle (which is covered by UM/UIM).
- It can also go into effect if you are covered and the at-fault driver’s liability insurance is not enough to cover all of your bodily injuries.
- You may also be able to recover if you are a passenger in another person’s car which is not insured or underinsured, but you have UM/UIM on your own car.
C. PERSONAL INJURY PROTECTION (PIP)
This type of insurance will pay for bodily injury that the insured driver or passenger suffers due to an auto collision. Texas law states that you are entitled to $2,500.00 in personal injury protection unless you explicitly reject these benefits at the time your insurance application was filed with your insurance agency. This means that if you do not have (PIP) coverage listed on your policy, you may still be entitled to the coverage. This happens when the insurance company can’t produce a document with your signature rejecting the coverage. You can, of course, purchase more coverage than the minimum by paying more premiums.
D. WHAT COVERAGE SHOULD I KEEP?
You must carry a minimum of $20,000/$40,000 liability limits according to Texas law to benefit the “innocent” party should you become involved in an accident.
We highly recommend that you carry a minimum of:
- $20,000/$40,00 Uninsured/Underinsured coverage or a sum equal to your maximum liability coverage, if greater.
- $2500, Personal Injury Protection (PIP), or greater.
- Collision coverage for sum owed a finance company or bank on your car.
Remember, if you have a net worth greater than the liability limits on your policy, and you are at fault in the accident, you may be sued for all sums above the policy limits on your policies. So it is a good idea to carry insurance in an amount equal or greater than your net worth. If you purchase a minimum of $100,000/$300,QOO primary liability coverage, you will be eligible to purchase relatively low cost Umbrella Insurance coverage which will cover you on higher liability limits.