Are you overpaying for insurance?


Do I have to purchase insurance?

Texas law requires drivers to be able to pay for the accidents they cause. Most people meet this requirement by buying automobile "liability" insurance. Liability insurance pays to treat people injured in an accident that you cause. It also pays to repair or replace the other driver´s damaged property.

You must have enough liability insurance to pay up to $30,000 in medical expenses for each person injured in an accident, up to a combined total of $60,000 for everyone who was hurt in an accident. You also must have at least $25,000 in coverage to pay to repair or replace the other driver´s car. Because of these coverage amounts, basic minimum liability coverage is often called "30/60/25 coverage."

Medical care and vehicle repair or replacement costs can be expensive. Therefore, minimum coverage might not be enough to cover your financial obligations if you cause a serious accident. It´s a good idea to consider raising your coverage limits. Raising your coverage limits will raise your policy premium, however.

Who pays to fix my car if I am in an accident?

Liability insurance pays to repair the other driver´s car and does NOT pay to fix your car. You will need to add "collision" coverage to your policy to pay to fix your car if it´s damaged in a wreck that you caused. "Comprehensive" coverage pays to repair or replace your car if it´s stolen or damaged by hail, fire, road debris, vandalism or other similar covered risks. Texas law does not require you to have collision and comprehensive coverage. However, if you still owe money on your car, your lender will probably require you to have them. If your car is damaged in a wreck caused by another driver, the other driver´s insurance will pay to fix your car, up to the other driver´s policy limits.

What will happen if I don't have auto insurance?

Driving without auto insurance is against the law. A law enforcement officer will require you to show proof that you have auto insurance during any traffic stop. Your insurance company will provide you with an "insurance card" that will qualify as your proof of insurance. The card will explain the basic features of your auto policy, including the dates the coverage begins and ends. You should keep your insurance card with you while driving. If you are unable to show proof of insurance, you will probably get a ticket. You could face a fine of $175 to $350 for a first offense. If you are stopped again without proof of insurance, you could be fined up to $1,000, your vehicle could be impounded for 180 days, and you could have your driver license suspended.

The financial consequences of driving without insurance can be even more severe. If you cause an accident, you will be financially liable for any resulting injuries or property damage. In the event of a serious accident, you may have to pay tens of thousands of dollars out of your own pocket. If you can´t pay the amount you owe, you could be sued, and a court could order that the money be deducted from your current and future earnings. In addition, it could also mean that the person injured in the accident will have difficulty receiving the medical care necessary for a complete recovery.

Can I get a driver's license if I don't have an auto insurance policy?

No. All applicants for a Texas driver license must show proof of insurance to get a driver license. You´ll have to show proof of insurance regardless of whether you´re getting a driver license for the first time, renewing your driver license or getting a Texas driver license after moving from another state.

When do I have to show proof that I have auto insurance?

You have to show proof of insurance any time a law enforcement officer asks you for it. A law enforcement officer will ask you for proof of insurance if you´re involved in an accident, regardless of whether you caused the accident or not. Police will also ask you for proof of insurance if you´re stopped because of a traffic violation or for any other reason. You also have to show proof of insurance when you get or renew your driver license, register your car and get your car inspected.

How do companies decide what kind of risk I might pose for an accident?

Each company evaluates risk differently. All companies generally use some type of formula that considers a variety of "risk factors." These factors include:

  • Driving history: One of the most important indicators of the way you will drive in the future is the way you´ve driven in the past. If you´ve previously caused an accident, an insurance company might reasonably assume that you could cause another accident in the future. Companies also will consider whether you´ve gotten any speeding tickets or other moving violations. If you have accidents or tickets on your driving record, you will pay more for insurance. If you have multiple accidents or tickets, some companies may refuse to sell you a policy
  • Age: Statistics show that young, inexperienced drivers are more likely to cause accidents. As a result, younger drivers, especially teenagers, pay higher rates for car insurance. Insurance rates for good drivers generally drop considerably after the age 25.
  • Gender: At younger ages, male drivers are statistically more likely to be involved in a car accident than female drivers. Therefore, younger male drivers tend to pay higher rates. After the age 30, the accident risk of male and female drivers are generally considered equal.
  • Lifestyle: People who are married or have children tend to be involved in fewer accidents and generally pay lower rates.
  • Credit History: Statistics show that drivers with poor credit histories tend to have more accident claims than drivers with good credit. Many, but not all, insurers use credit scores to help determine a driver´s accident risk. If you haven´t had time to develop a credit history because of your age, insurance companies generally won´t count your lack of history against you. However, most companies will consider your credit history in the future when you renew a policy or change companies. Therefore, maintaining a good credit history by paying your bills on time and avoiding excess debt can result in lower auto insurance rates
Can I buy insurance at a car dealership?

No. In Texas, insurance may only be sold by an insurance agent or broker licensed by the Texas Department of Insurance (TDI).

If I have an accident while driving a friend´s car, will my policy pay? What if my friend has a wreck while driving my car?

In most cases, the vehicle owner´s insurance pays for losses, regardless of who was driving. This means that if you´re in a wreck while driving a friend´s car, your friend´s policy will usually pay for it. If you have an auto policy, your insurance would pay any remaining amount that exceeds your friend´s policy limits. If your friend does not have insurance and you´re involved in an accident while driving his or her car, your policy will pay. Likewise, if a friend has an accident while driving your car, your policy will pay first, and your friend´s policy will pay any remaining amount that exceeds your policy limits. If you do not have insurance and your friend is involved in an accident while driving your car, your friend´s policy will pay.

If I get in a wreck and the total damage is higher than my policy's dollar limits, will the insurance company still cover me?

The insurance company will only pay up to the amount of your policy´s dollar limit. This means that if your policy´s property damage limit is $15,000, the company will only pay $15,000 to fix the other driver´s car. You will have to pay the rest yourself. The minimum liability coverage requirements might not be enough to meet your financial obligations if you´re involved in a serious wreck. It´s a good idea to consider buying a policy that has more than the minimum required coverage limits.

What if I can't find a company that will sell me insurance?

If an insurer turns you down or decline's to renew your coverage, keep shopping. Companies use different methods to determine your risk. Some companies may be willing to insure you, even though other companies have turned you down.

Are you overpaying for your insurance?