Texas law requires people who drive in Texas to be able to pay
for the automobile accidents they cause. Most drivers do this by
buying automobile liability insurance. Liability insurance pays to
repair or replace the other driver’s car and pays other people’s
medical expenses. It does not pay to repair or replace your car or
for your injuries. You must have at least the minimum amount of
liability coverage required by the state’s financial responsibility
law.
The current minimum liability limits increased on April 1,
2008, to $25,000 for each injured person, up to a total of $50,000
per accident, and $25,000 for property damage per accident. This
basic coverage is called “25/50/25” coverage. (The limits prior to
April 1 were $20,000 for each injured person, up to a total of
$40,000 per accident, and $15,000 for property damage per accident.)
Because of car prices and the high cost of medical care, the
minimum amounts might not be enough if you cause an accident. If
your liability limits are too low to pay for all of the other
driver’s costs, the driver may sue you to collect the difference. To
protect yourself financially, consider buying more than the basic
limits.
Proof of Financial Responsibility
When you buy an auto policy, your insurance company will send you
a proof-of-insurance card. You will need to show proof of insurance
when you
- are asked for it by a law enforcement officer
- have an accident
- register your car or renew its registration
- obtain or renew your driver’s license
- get your car inspected.
There are severe penalties for violating the state’s financial
responsibility laws. A first conviction will result in a fine
between $175 and $350. Subsequent convictions could result in fines
of $350 to $1,000, suspension of your driver’s license, and
impoundment of your automobile.
Know Your Rights
Texas has a Consumer Bill of Rights for auto insurance. Your
insurance company must send you a copy with your policy. Read it to
understand your rights under Texas law.
Auto Insurance Coverages
Automobile insurance pays for damages, injuries, and other losses
specifically covered by your policy.
Many insurance companies use the Texas Personal Automobile
Policy, a standardized policy form that offers eight types of
coverages. Companies may sell alternative policies if the Texas
Department of Insurance (TDI) approves them in advance. Read your
policy carefully, as coverages can vary by policy and company. Pay
special attention to the exclusions section, which lists the things
your policy doesn’t cover. The front page of your policy is called
the declarations, or “dec,” page. It shows the exact name of your
insurance company, your policy number, and the amount of each of
your coverages and deductibles.
The following summarizes the eight coverages in the Texas
Personal Automobile Policy. Although your coverages and policy terms
may differ from these, this summary can help you understand various
auto insurance coverages and the way they work.
- Liability Coverage (Basic liability coverage meets the
state’s financial responsibility requirement.)
Pays: Other people’s expenses for accidents caused by
drivers covered by your policy, up to your policy’s dollar limits.
These may include the other person’s
- medical and funeral costs, lost wages, and compensation for
pain and suffering
- car repair or replacement costs
- auto rental while the other driver’s car is being repaired
- punitive damages awarded by a court.
Liability insurance also pays your attorney fees if someone
sues you because of the accident and bail up to $250 if you are
arrested.
Covers: You and your family members. Other people
driving your car with your permission might be covered. You and
your family members might be covered when driving someone else’s
automobile – including a rental car – but not a car that you don’t
own but have regular access to, such as a company car. Family
members attending school away from home might be covered, as well
as a spouse living elsewhere during a marital separation.
Note: Some policies won’t cover other people, including
family members, unless they’re specifically named in the policy.
Your policy’s dec page should list the names of all of the people
covered by the policy.
Who qualifies as a family member?
Generally, a “family member” is anyone living in your home
related to you by blood, marriage, or adoption, including your
spouse, children, in-laws, adopted children, wards, and foster
children.
- Medical Payments Coverage
Pays: Medical and funeral bills resulting from
accidents, including those in which the other person is a
pedestrian or bicyclist.
Covers: You, your family members, and passengers in your
car, regardless of who caused the accident.
- Personal Injury Protection (PIP) Coverage
Pays: Same as medical payments coverage, plus 80 percent
of lost income and the cost of hiring a caregiver for an injured
person.
Covers: You, your family members, and passengers in your
car, regardless of who caused the accident.
An insurance company must offer you $2,500 in PIP, but you can
buy more. If you don’t want PIP, you must reject it in writing.
- Uninsured/Underinsured Motorist (UM/UIM) Coverage
Pays: Your expenses from an accident caused by an
uninsured motorist or a motorist who did not have enough insurance
to cover your bills, up to your policy’s dollar limits. Also pays
for accidents caused by a hit-and-run driver if you reported the
accident promptly to police.
- Bodily injury UM/UIM pays without deductibles for medical
bills, lost wages, pain and suffering, disfigurement, and
permanent or partial disability.
- Property damage UM/UIM pays for auto repairs, a rental car,
and damage to items in your car. There is an automatic $250
deductible. This means you must pay the first $250 of the
repairs yourself.
Covers: You, your family members, passengers in your
car, and others driving your car with your permission.
Insurers must offer UM/UIM coverage. If you don’t want it, you
must reject it in writing.
- Collision (Damage to Your Car) Coverage
Pays: The cost of repairing or replacing your car after
an accident. Payment is limited to your car’s actual cash value,
minus your deductible. Actual cash value is the market value of a
car like yours without damages.
- Comprehensive (Physical Damage Other than Collision)
Coverage
Pays: The cost of replacing or repairing your car if it
is stolen or damaged by fire, vandalism, hail, or a cause other
than collision. Comprehensive coverage also pays for a rental car
or other temporary transportation if your car is stolen. Your
policy won’t pay for an auto theft unless you report it to police.
Payment is limited to your car’s actual cash value, minus your
deductible.
If you still owe money on your car, your lender will require
you to have collision and comprehensive coverage.
- Towing and Labor Coverage
Pays: Towing charges when your car can’t be driven. Also
pays labor charges, such as changing a tire, at the location where
your car became immobile.
- Rental Reimbursement Coverage
Pays: A set daily amount for a rental car if your car is
stolen or is being repaired because of damage covered by your
policy.
Coverage for Stereo Equipment
Your policy won’t pay for CDs, tapes, cell phones, citizen band
radios, or stereo equipment not permanently installed in your car.
However, you can buy endorsements to your policy that provide
separate coverage for these items for an additional premium.
Coverage of New or Additional Automobiles
If you buy another car, your policy might automatically cover it
with certain limitations. Read your policy to know whether it
automatically covers an additional or replacement car.
- In general, an additional car usually has the same coverage as
the car on your policy with the broadest coverage. For example, if
you have two cars – one with liability coverage only and one with
liability, collision, and comprehensive coverages – and you buy a
third car, the third car will automatically have liability,
collision, and comprehensive coverage.
- A replacement car usually has the same coverage as the car it
replaced. For example, if you trade in an older car that only had
liability coverage, the new car will automatically have only
liability coverage.
Be sure to tell your insurance company as soon as possible that
you have added or replaced a car and which coverages you want. You
could lose coverage on an additional or replacement car if you wait
longer than the number of days specified in your policy to notify
your insurance company.
Coverage for Rental Cars
Auto rental agencies offer collision damage waivers and liability
policies. The collision damage waiver is not insurance. It is an
agreement that the rental company will waive its right, with certain
exceptions, to recover from the renter the cost of damage to the
car.
If you have auto insurance, your policy may already cover damage
to a rental car. Your coverage limit, however, might be less than
the value of a rental car. Read your policy to know what’s covered
and the coverage limits. If your coverage limit is too low, consider
increasing it. You will pay more in premium, but it might be cheaper
than buying additional coverage through the rental agency,
especially if you rent cars often. The Texas Automobile Rental
Liability Policy provides liability insurance for renters who do not
have a personal auto policy.
If you don’t own a car, but borrow or rent cars often, you can
buy a non-owner liability policy. A non-owner policy pays for
damages and injuries you cause when driving a borrowed or rented
car, but it does not pay for your injuries or damage to the car you
were driving.
Driving in Other States, Canada, and Mexico
A Texas automobile insurance policy usually meets the financial
responsibility requirements of other U.S. states and Canada. Mexico,
however, does not recognize U.S. auto liability policies.
Mexico does not require drivers to have automobile liability
insurance. Mexican authorities can hold drivers criminally and
financially responsible for any auto accidents they cause. If you’re
in an accident that results in an injury, police may detain you
until they determine who is at fault. You will have to show that you
either have insurance recognized by the Mexican government or the
financial ability to pay any judgment against you.
Some U.S. companies provide a free endorsement extending your
policy’s coverage to infrequent trips of up to 10 days and as far as
25 miles into Mexico. You can buy coverage for longer stays, but it
is usually valid only within 25 miles of the border. In addition,
these endorsements might not meet Mexican legal requirements. You
can buy Mexican liability insurance from Texas agents who specialize
in it. Check your phone book for listings of insurance agents who
specialize in auto insurance for travel in Mexico. Your local agent
also might be able to help you find coverage with a Texas-licensed
Mexican company.
You may be able to buy a Mexico “tourist” endorsement for your
U.S. policy. This endorsement extends your liability coverage to pay
costs exceeding a Mexican liability policy’s limits. It covers trips
of any distance and any length of time. Ask your agent which
endorsements your insurance company offers.
Auto Insurance for Young Drivers
Young drivers must comply with the state’s financial
responsibility laws. Parents can usually add their children to their
auto policy to satisfy the financial responsibility requirements.
Adding a young driver to a parents’ policy can be expensive, but
it’s cheaper than buying a separate auto policy.
Some policies require all drivers to be named on the policy for
coverage to apply. Therefore, it’s important that you list all
family members on the policy as soon as they reach driving age. If
you don’t have all of the drivers in your family listed on your
policy and the company learns about them later – because of an
accident claim, for instance – the company will bill you for the
extra premium you should have paid and could deny your claim and
coverage.
If you have children attending school away from home, tell your
insurance company. Because companies base rates on where a car is
usually located, it might need to adjust your premium. If the school
is in another state, check on the financial responsibility laws in
that state to make sure you have the appropriate coverages.
Generally, if a teenager is the principal driver of a particular
automobile, the company will base the teen’s rate on that car.
Otherwise, the company will assign the teenage driver to the car
(usually the most expensive) in your household that produces the
highest rate.
Removing Your Children from Your Policy
You may want to remove your children from your policy when they
no longer live with you. You’ll probably have to prove to the
insurance company that your child has moved. You can use documents
like a driver’s license, lease agreement, or utility receipts to
show that your child has a separate address.
It’s probably not a good idea to remove children from your policy
if they are attending school away from home. It’s risky to drop
coverage if your teenager might occasionally drive at school or when
home on visits. Many insurance companies will require you to keep
students on your policy, even if you would like to remove them.
You can sometimes remove a teenage driver from your policy by
buying a non-owner policy. This usually isn’t a good idea, however.
A non-owner policy only provides liability coverage for someone
driving a vehicle that he or she doesn’t own. If your teenager has
an accident while driving your car, neither your policy nor the
non-owner policy will pay to repair or replace your car. The rates
for a non-owner policy will likely cost more than leaving the teen
on your policy.
Saving Money on Insurance for Young Drivers
Some insurance companies give a discount for teenagers who
complete a Department of Public Safety (DPS)-approved driver
education course. Drivers taught by their parents may also be
eligible for the discount if the parent used a DPS-approved course.
Some companies offer discounts to young drivers who make good grades
in school or who belong to certain youth groups. Ask your agent
about discounts.
Auto Insurance for ‘High Risk’ Drivers
Insurance companies often check motor vehicle records for your
driving history and credit reports for your financial history before
writing or renewing your policy. Owning a car built for speed also
can label you as high risk.
Many companies use the Comprehensive Loss Underwriting Exchange
(CLUE) to learn an applicant’s insurance claims history. If the
company based its decision to deny, cancel, or nonrenew you even
partly on a CLUE report, you can get a free copy by calling the
ChoicePoint Consumer Center or by visiting the
ChoicePoint website
1-800-456-6004
www.choicetrust.com/index2.htm
Before calling, get the CLUE reference number from the insurance
company. Using the reference number will speed the process and
ensure that you request the right report.
Insurance Options for High-Risk Drivers
- If you’re having trouble finding insurance because you have
tickets, accidents, or poor credit, keep shopping. Each company
has its own guidelines for deciding whether to insure people.
Several major insurer groups write coverage for high-risk drivers
through one of their member companies.
- If you can’t find a company willing to sell you a policy, you
may be able to get basic liability coverage through the Texas
Automobile Insurance Plan Association (TAIPA). You qualify for
TAIPA coverage only if two insurance companies reject you.
TAIPA only provides the basic liability insurance required by
Texas law. It doesn’t provide collision or comprehensive coverage or
higher liability limits than the law requires. You can add personal
injury protection (the minimum limit is $2,500) and
uninsured/underinsured motorist coverage.
TAIPA coverage costs more than most companies charge. TAIPA
policyholders pay additional premiums, called surcharges, for
traffic convictions. They also pay higher surcharges than other
drivers pay for accidents. TDI rules encourage insurance companies
to take policyholders out of TAIPA and insure them at lower rates
after a year without tickets or accidents. The rules also require
companies to offer cheaper “voluntary” policies to their TAIPA
policyholders who have gone three years without tickets or
accidents.
To get TAIPA coverage, apply with a licensed insurance agent.
Only agents specifically certified by TAIPA may sell TAIPA policies.
An agent who quotes you a premium higher than TAIPA’s must tell you
about TAIPA if you were previously uninsured and had no more than
one accident and one ticket in the previous three years. For more
information, call TAIPA
1-800-580-TAIP (8247)
444-4441 in Austin
After an Accident ... What Now?
- Move your car, if possible, to avoid blocking traffic and to
protect it from further damage.
- Call the police if somebody is injured or killed, if you can’t
move your car, or if the accident involved a hit-and-run driver.
Your uninsured motorist coverage pays for a hit-and-run accident
only if you report it to police.
- Get the other driver’s name, address, telephone number,
license plate number, driver’s license number, and insurance
information. Give the other driver the same information about you.
- Write down the insurance company name and the policy number
exactly as shown on the other driver’s proof-of-insurance card.
Insurance companies often have similar names, so make sure you get
the correct company name.
- Get the names, addresses, and telephone numbers of any
witnesses to the accident.
- Notify your insurance company as soon as possible. Your
company probably has a 1-800 number to report claims. If not, call
your agent. The agent or company will advise you about seeing an
adjuster and getting repair estimates. Also, give your agent or
company the names and addresses of any witnesses and anyone
injured.
- If you reported your claim by phone, follow up in writing as
soon as possible to protect your rights under Texas’ prompt
payment of claims laws.
- Send the company copies of the accident report and any legal
papers you receive about the accident.
- Cooperate with the company’s investigation. You might have to
submit a proof-of-loss form or have a medical examination.
If the other driver refuses to tell you the name of his or her
insurance company, get a copy of the police accident report. The
accident report should list the other driver’s name and insurance
company. If the police did not investigate the accident, you can
report the driver’s refusal to police. This could result in a report
identifying the driver’s insurance company. In addition, the Texas
Department of Public Safety keeps files of forms – called SR-22s –
that show the insurance companies of people convicted of DWI or
driving without insurance. Call the DPS Customer Service
Bureau
512-424-2600
Accidents Caused by Other Drivers
If you were in an accident caused by another driver, the other
driver’s insurance company should pay the following costs, up to the
policy’s limits:
- repair or replacement of your car
- car rental while your automobile is being repaired
- your medical and hospital bills
- wages lost because of an injury
- compensation for pain and suffering if anyone is hurt.
If the other driver’s insurance won’t cover all your medical
bills, file a claim for the difference against your Personal Injury
Protection (PIP) coverage, if you have it. For amounts over that,
you can claim against your uninsured/underinsured motorists (UM/UIM)
coverage or your health insurance policy.
If the other driver’s policy won’t cover all of your auto
repairs, file a claim against your collision or UM/UIM coverage for
the difference (minus your deductible) between the damage to your
car and what the other driver’s policy will pay.
The other driver’s insurance company may ask you to sign a
release to settle your claim and forgo future claims related to the
accident. Don’t sign a release until you are satisfied with the
total settlement. Get a letter from your doctor estimating the cost
and length of your future medical treatment. You might want to
consult an attorney before accepting a settlement. Under Texas law,
you have two years after an accident to either settle your claim or
file a lawsuit.
Texas law prohibits insurance companies from delaying payment of
a claim in order to pressure you to sign a release. If you believe
an insurance company is delaying payment to pressure you, file a
complaint with TDI.
If the other driver denies fault, his or her insurance company
may refuse to pay the claim. Independent witnesses could make a
difference in getting the company to pay. It’s important to get
names, addresses, and telephone numbers of any witnesses to the
accident. Make sure the insurance company knows about the witnesses.
If the company continues to refuse to pay the claim, you can file a
claim against your own insurance or you may have to go to court to
resolve the issue.
Before filing a claim with your company, ask your agent or your
company’s underwriting department how a claim might affect your
rates on renewal. A company cannot refuse to renew your policy
solely because you had one accident in a 12-month period that was
not your fault. However, if the accident affected your DPS driving
record, your company may consider it in determining your rates,
whether you made a claim on the accident or not.
Getting Your Car Repaired
Your insurance company will either have an adjuster inspect your
car and calculate an estimate for repairs or ask that you provide
repair estimates from mechanics and auto body shops. Some companies
may give you a list of “preferred” shops, but they cannot require
you to use a particular repair shop. On collision and comprehensive
claims, your company is obligated to pay only for parts of “like
kind and quality” to those that were damaged. Insurance companies
will pay for repairs or replacement only up to the car’s actual cash
value. Actual cash value is the amount your car would be worth if it
weren’t damaged.
If the repair estimates are more than your car is worth, the
insurance company will likely “total” your car and pay you its
actual cash value rather than pay to fix it. Insurance companies
typically use the National Automobile Dealers Association’s Used Car
Guide to determine the value of your car. The company’s offer might
not recognize your car’s condition, special features, or value on
the local market. Be prepared to negotiate with the company to get
what you believe is a fair deal. A company might raise its offer if
you can show that your car would sell for a higher price in your
area. Get written price quotes for a similar automobile from several
used car dealers, or look in the classified section of your local
newspaper for used car prices.
Sometimes the insurance company may want to total your car, but
you’d prefer to have it repaired instead. You can keep your car if
you are willing to subtract its salvage value from the insurance
settlement. Make sure the cost to repair the car will not exceed the
car’s actual cash value. To find out the salvage value, contact
local salvage yards for estimates.
If you and your insurance company can’t agree on the amount of
your settlement, you can demand an appraisal. Appraisal allows you
and the company to hire separate damage appraisers. The two
appraisers choose a third appraiser to act as an “umpire.” The
appraisers review your claim, and the umpire rules on any
disagreements. The appraisal decision is binding as to the amount of
the loss. If there is a dispute about what is covered, you can
pursue a settlement of the coverage issue after the appraisal. You
must pay for your appraiser and half of the umpire’s costs.
Appraisal is available only in disputes between you and your
insurance company. It is not available if the other driver was at
fault and you disagree with his or her company’s offer.
Getting a Rental Car
If you have more than basic liability coverage or another driver
caused your accident, you should be able to get a rental car while
yours is in the shop.
- If the other driver was to blame, his or her liability
insurance will pay for a rental car.
- If the accident was a hit-and-run or the other driver was
uninsured and at fault, your UM/UIM property damage coverage will
pay for a rental car.
- If your car was stolen and you have comprehensive insurance,
your company will provide a set amount each day, up to your
policy’s limit, for a rental car.
- If your car is being fixed or replaced for some other reason,
your insurance company won’t provide a rental car unless you have
rental reimbursement coverage.
Filing a Claim
Once you have filed a claim, Texas law sets deadlines for the
insurance company to act.
- The company must respond within 15 days after receiving your
claim in writing. It will probably ask you to document your loss.
- After you submit any requested documentation, the company has
15 business days to accept or reject your claim.
- Once the company agrees to pay your claim, it must send your
check or draft within five business days.
A company that cannot meet these deadlines must send you a notice
explaining why. The company then has 45 days to either approve or
reject your claim.
Note: The prompt payment law does not apply if another
driver’s insurance company is paying the claim. However, the company
is required to act in good faith and to make a prompt and fair
settlement.
If the insurance company rejects your claim, it must explain the
rejection in writing. If the company contends that your policy
doesn’t cover the loss, ask to see the policy language that supports
denial of your claim. A court usually will order the company to pay
if the language is unclear and the policy could reasonably be read
your way.
Getting Help
If you have a problem with your insurance company, first try to
resolve the problem yourself. Often disputes are the result of
miscommunication. Talk to your agent or a company representative.
Texas law requires most companies to have toll-free telephone lines
for their policyholders.
If you are unable to resolve the dispute, you can file a
complaint with TDI. TDI will notify the company of your complaint,
ask for a detailed response, and send you a copy of the company’s
response. The insurance specialist assigned to your complaint will
send you an explanation of the outcome, usually within 40 days after
receiving your complaint.
TDI has limited jurisdiction in some complaints. For instance, we
can’t resolve questions of fact or determine liability (who is at
fault in an accident). These issues generally must be resolved in
court. However, even when our jurisdiction is limited, our
involvement may encourage the company to review your issue more
thoroughly. In addition, your complaints and inquiries help TDI
assist other Texans by identifying potential problems with insurance
companies and agents.
Shopping for Auto Insurance
Rates vary widely among companies, so it pays to shop around.
Following are some tips to help you find the best deal for your
money:
- Decide before shopping what coverages you need.
- Consider choosing a higher deductible. Your deductible is the
amount you must pay before the insurance company will pay. Higher
deductibles will lower your premium, but you’ll have to pay more
out of your own pocket if you have a claim.
- Get price quotes from several companies. Make sure the quotes
are for the same coverages.
- When getting a price quote or applying for insurance, answer
questions truthfully. Wrong information could result in an
incorrect price quote or could lead to a denial or cancellation of
coverage.
- Ask your agent whether you qualify for any discounts the
company might offer.
- Consider factors other than price, including a company’s
financial rating, complaint index, and license status. The
financial rating indicates a company’s financial strength and
stability, and the complaint index is an indication of its
customer service. Buy only from licensed companies and agents. It
is against the law to sell insurance without a license in Texas.
You can learn more about a company, including its license status,
complaint history, and financial rating from an independent rating
organization, by calling TDI’s Consumer Help Line or
by visiting our website
1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us
Insurance on the Installment Plan
Auto insurers in Texas must offer installment plans. Some
companies only offer payment plans through premium finance
companies, which often charge high interest rates.
You should seek not only low rates but also low-cost financing.
Ask who will provide your installment plan. Look for insurance
companies that offer their own installment plans. Ask about the down
payment, the number of installments, interest or service charges,
and the amount of your total monthly payment.
Insurers and premium finance companies must give you terms at
least as favorable as these:
- For a 12-month policy, a 16.67 percent down payment and 10
equal monthly installments. If the policy is through the Texas
Automobile Insurance Plan Association (TAIPA), the down payment is
20 percent.
- For a six-month policy, 33.33 percent down, with four equal
monthly payments.
Premium Finance Companies
Premium finance companies loan people money to pay their
insurance premiums. Sometimes the only installment plan offered is
through a premium finance company, which the agent selling your
policy might own.
The insurance agent must tell you if your installment plan is
with a premium finance company and must give you the premium finance
company’s name.
Note: If you buy insurance through TAIPA, an agent who
offers a premium finance company loan must give you a disclosure
form comparing it with TAIPA’s installment plan. The form will show
a side-by-side comparison of the premium finance company’s payment
plan and the TAIPA plan. The form will show fees, interest payments,
and the amount you will pay for each plan. If you choose the premium
finance company, you must sign the form as proof you made your
choice after seeing the comparison.
If you enter into a premium finance agreement with a premium
finance company, you will pay the down payment to your agent or
company. Be sure to get a receipt at the time of payment. The
premium finance company pays the balance of your premium directly to
the insurance company and then collects the amount financed, plus
interest, from you in installments.
Your loan agreement assigns your power of attorney to the premium
finance company for payments involving your policy. The premium
finance company can cancel your policy if you fall behind in your
payments.
If the insurance company cancels your policy for any reason, the
premium refund goes to the premium finance company, which uses it to
pay off your loan. The premium finance company will refund any
remaining money to you. The finance company must send your refund to
you within 20 days after receiving it from the insurance company.
A premium finance company must have a license from TDI. You can
verify licenses by calling TDI’s Consumer Help Line.
When dealing with a premium finance company, here are some things
you should do to protect yourself:
- Make sure the agent shows you the cost of your insurance
policy and the cost of financing your payment plan separately so
you can see exactly what you’re paying for. Don’t enter into a
premium finance agreement unless you understand the charges and
how the plan works.
- Compare the premium finance company’s charges to installment
plans offered by insurance companies and to bank or credit card
interest rates. It could be cheaper to pay for your policy with a
credit card if the credit card has a lower interest rate than the
premium finance company.
- If you enter into a premium finance agreement, make sure the
agreement correctly identifies the financed policy. The agreement
should show the policy or binder number, effective date of the
policy, and the premium amount.
- Be sure you complete all the paperwork and sign and date the
agreement before you leave the agent’s office.
- Get a copy of the installment agreement. Federal
truth-in-lending laws require the lender to give you a copy.
- Make your installment payments only by check or money order
payable to the company named on your premium finance notice. If
you pay cash, demand a receipt.
- If you or the insurance company cancels your policy, make sure
the premium finance company pays any refund it owes you.
Understanding Rates
Texas law requires insurance rates to be reasonable, adequate,
not excessive to the risks for which they apply, and not
discriminatory. Auto insurance companies in Texas set their own
rates and file them with TDI for review. Companies do not have to
receive prior approval before using their rates, but if TDI
determines that a company’s filed rates are excessive, it can order
the company to make refunds.
Factors that Affect Your Premium
Companies may use a number of criteria to establish your premium.
These include:
- Your age and, for younger drivers, your marital status.
Male drivers under 25 and unmarried women under 21 have the
highest rates. Drivers over 50 may get discounts.
- Your driving record and claims history. A
good driving record can save you money. If you have accidents or
tickets on your driving record, you’ll have to pay more for
insurance. Companies may add surcharges to your premium for major
convictions, some driving violations, and accidents that result in
property damage. Some surcharges are mandatory and will apply to
your premium for three years.
- Where you keep your car. Because drivers in
urban areas have more accidents and auto thefts, their rates are
typically higher than the rates for drivers in rural areas.
- The type of car you drive. Collision and
comprehensive rates are highest for luxury, high-performance, and
sports cars. Rates may also be higher for cars that damage easily
or cost more to repair.
- Your car’s primary use. Rates are higher for
cars driven to and from work or used for business than for cars
driven solely for pleasure.
- Your credit score. Companies may consider
your credit score when deciding whether to sell you a policy and
at what cost. A company cannot refuse to sell you a policy or
cancel or nonrenew your policy solely based on your credit.
- Whether you drove uninsured in Texas.
Companies may charge more if you drove uninsured in Texas for more
than 30 days in the 12 months before you applied for insurance.
However, a company cannot otherwise charge you more for liability
coverage because of your prior lack of coverage.
Companies must file their underwriting guidelines with TDI and
update them each time they make a change.
Discounts and Surcharges
Discounts can help you save money on your premium. Discounts vary
by company. Following is a list of some of the discounts commonly
available in Texas:
- defensive driving and driver education courses for young
drivers
- students with good grades
- parent or family whose young driver is away at school without
a car
- airbags and automatic seatbelts
- automatic daytime running lights
- antilock brakes
- two or more cars on a policy
- driver age and annual mileage driven
- policy renewal with good claims and driving records.
If you have a poor driving record, you can expect to pay more for
your insurance. Companies may add surcharges to your premium – some
as high as 60 percent – for the following:
- accidents (the more accidents, the higher the surcharge)
- moving violations (speeding, etc.)
- involuntary manslaughter
- driving under the influence
- criminally negligent driving
- driving without a license or with a suspended license.
Losing Your Insurance
Companies may cancel or nonrenew a policy for a variety of
reasons. Cancellation means the company terminates your policy
before its expiration date. Nonrenewal means the company refuses to
renew your policy when it expires.
A company must explain in writing its reasons for declining,
canceling, or not renewing your policy. This explanation must
include the incident or risk factor that violated the company’s
underwriting guidelines and the insurer’s sources of information.
- An insurance company may not cancel an auto policy that has
been in effect for more than 60 days unless
- you fail to pay your premium
- you file a fraudulent claim
- your driver’s license or motor vehicle tags are suspended or
revoked (this also applies to other drivers who live with you or
use your car).
During the first 60 days, a company may cancel a policy for any
lawful reason, including a ticket or an accident. If the company
cancels your policy because of an accident, it still must pay for
covered damages resulting from the accident. The company must send
you a written notice at least 10 days before canceling your policy.
If either you or the company cancels your policy, the company
must refund any “unearned premium” to you. Unearned premium is the
amount you paid in advance that did not actually buy coverage. For
example, if you paid a six-month premium of $600 and you cancel your
policy after one month, the company owes you $500 in unearned
premium, minus any applicable agent or policy fees.
A company cannot refuse to renew your policy unless it has been
in effect for at least 12 months. This means a company must renew a
six-month policy to give you a full 12 months of coverage. The
company must give you 30 days’ notice before not renewing your
policy.
In Texas, a company cannot refuse to renew your policy because of
- weather-related claims, including damage from hail, floods,
tornadoes, high winds, and hurricanes
- damage from colliding with animals or birds
- damage from gravel and other flying and falling objects (the
company can raise your deductible if you have three such claims in
36 months)
- towing and labor claims (the company can refuse to renew your
towing and labor coverage if you have four such claims in 36
months)
- other claims or accidents that cannot reasonably be blamed on
you, unless you have more than one of these claims in a 12-month
period.
Sometimes an insurer will move you to another company in its
company group. If a company moves you to another company, it must
give you 30 days’ notice that it will not renew your original
policy. If the company fails to give you 30 days’ notice, TDI can
require the company to renew your policy for another year in your
original company.
If you get a nonrenewal or cancellation notice, start shopping
for new insurance immediately. Make sure you keep your liability
coverage uninterrupted to satisfy Texas’ financial responsibility
laws. If you still owe money on your car, your lender will usually
require you to maintain collision and comprehensive coverages
without interruption. If you cancel or lose these coverages, your
lender will buy single-interest automobile physical damage coverage
and add the cost to your loan payment. This coverage is expensive
and protects only the lender.
Your Rights against Unfair
Discrimination
An insurance company cannot deny, refuse to renew, limit, or
charge more for coverage because of your race, color, religion, or
national origin.
A company also cannot deny, refuse to renew, limit, or charge
more for coverage because of your age, gender, marital status,
geographic location, disability, or partial disability unless the
refusal, limitation, or higher rate is “based on sound underwriting
or actuarial principles.” This means the company would have to show
valid evidence that you present a greater risk for a loss than other
people it is willing to insure. A company cannot nonrenew your
policy because someone in your family has reached driving age.
In addition, a company cannot discriminate between individuals of
the same rate or risk class in its rates, policy terms, benefits, or
in any other manner unless the refusal, limitation, or higher rate
is “based on sound actuarial principles.”
You may sue insurance companies for unfair discrimination,
including denial of insurance. You must file the suit in a Travis
County district court. However, if the court finds the suit
groundless, in bad faith, or brought for the purpose of harassment,
the court could order you to pay the insurance company’s legal
expenses.
For More Information or Assistance
For answers to general insurance questions or for information on
filing an insurance-related complaint, call the Consumer Help
Line between 8 a.m. and 5 p.m., Central time, Monday-Friday,
or visit our website
1-800-252-3439
463-6515 in Austin
For printed copies of consumer publications, call the 24-hour
Publications Order Line
1-800-599-SHOP (7467)
305-7211 in Austin
Help us prevent insurance fraud. To report suspected fraud, call
our toll-free Fraud Hot Line
1-888-327-8818
To report suspected arson or suspicious activity involving fires,
call the State Fire Marshal’s 24-hour Arson Hot Line
1-877-4FIRE45 (434-7345)
