Here is what you should do to meet the law (specifically Texas law) and protect yourself and your loved ones:
1. Purchase at least the minimum required liability insurance and keep it paid up to date. You have to do this to legally drive down the road. Failure to carry at least the minimum coverage can be disastrous - legally, financially and emotionally, if you are in an accident that happens to be your fault. (And any of us can look away for a second and be in that accident.)
2. Once you have purchased the minimum liability coverage, you need to assess your needs. There are different coverages you can purchase and different needs you may have that someone else might not have.
3. You should select as much liability coverage as you can afford and evaluate how much you need to protect your assets. If you have a real estate or other property, cars, boats, money in the bank, retirement accounts, etc. That is potentially subject to being taken from you and applied to any judgment against you for an accident you caused. You should make sure that your assets are protected by purchasing high enough liability coverage to protect those assets. It is much cheaper to pay an insurance premium than it is to recreate all these other purchases, if they are taken from you to pay a judgment. (My father termed the failure to protect you assets in this manner "penny wise and pound foolish.")
4. The major coverages in addition to liability coverage are:
- uninsured/underinsured motorist coverage
- collision coverage
- comprehensive coverage (also known as "other than collision coverage)
- personal injury protection coverage
- medical payments coverage
- towing
- death benefit
6. Uninsured/underinsured motorist coverage (UM) is a VERY important coverage to carry. Anyone driving on the roads today should have UM in the same amount as their liability coverage. UM covers you and your family and anyone in your vehicle in case an uninsured or underinsured person causes an accident in which you are injured. In other words, it acts as the other driver's liability insurer -- which provides coverage to you and your family if the person who causes the collision is not responsible and does not buy insurance. Unfortunately, those who lack the responsibility to carry liability coverage are more likely to lack responsibility when they drive down the road - thereby causing more accidents.
7. UM is the MOST important coverage to buy, once you have your liability coverage. And you should purchase it in the SAME amount as your liability coverage. Why would you buy $100,000 worth of insurance to protect your assets and buy only $25,000 to protect your self and your family -- they are worth much more than all your assets. And the BEAUTY of UM coverage is that it is CHEAP - compared to liability coverage. SO PROTECT YOUR FAMILY - BUY UM COVERAGE!
8. Collision coverage is just what it sounds like. If you collide with something, your insurer will cover the damage to the car or pay you the market value of the car -- reduced by whatever the deductible is. When you decide on the deductible, you have to compare how much the premium on the coverage is compared to how much you can afford to pay on the damage to the car. It is a balancing act. The larger the deductible, the smaller the premium. I generally see $500 and $1000 deductibles now days. You have to decide what you can afford when picking your deductible.
9. Comprehensive or other than collision coverage is also pretty self explanatory. This coverage provides payment if your vehicle is damaged in some way other than in a collision. For example a hail storm -- or a fire. The deductible work the same as in collision coverage.
10. Personal Injury Protection (PIP) is a type of coverage that is mandated by the law for the insurance carrier to provide to you, unless you reject it in writing. Once you reject it in writing that rejection applies to ALL policies you purchase from then on, unless you unreject it in writing. This is a VERY important coverage. It will provide reimbursement to you for medical bills and lost wages you suffer due to an injury in a collision -- in addition to any claim you have against another driver. (One of the few times you can make a double recovery of your damages.) This coverage is cheap and very important if you incur medical bills -- even if you have health insurance. (Because health insurance has higher and higher deductibles and co pays, PIP is great to have to assist in paying those.)
11. Many insurance agents advise NOT purchasing PIP. Don't listen to them. PIP is second only to UM in protecting yourself, your family and those riding in your car if you are in an accident. PIP is sold in increments of $2500. The minimum is $2500. I suggest pricing it and buying as much as you can afford. Medical expenses have gotten outrageous. There are many times I see hospital emergency room bills over $10,000 where the person is treated and released and has only soft tissue injuries.
12. Medical Payments (Med Pay) coverage is very similar to PIP but is not mandated in the statutes. PIP is a much better buy than Med Pay. If you are going to buy this type of coverage, make sure you buy PIP and not Med Pay. (Med Pay only reimburses medical bills and not lost wages and Med Pay has to be repaid to the insurer if you make a recovery against a third party - no double recovery - and it cost about the same as PIP.) You get more bang for your buck with PIP.
13. Towing is another coverage. It is not expensive but not used much. You have to decide whether you can pay a towing bill if one arises.
14. Death benefits is another less purchased coverage. If you are killed in an accident, it will pay a death benefit to your family, estate or designated person. Usually this payment is available to pay or assist in paying funeral costs. This is a coverage for which each individual has to assess his or her individual need.
These are the main coverages available to be purchased when you go to buy auto insurance. If you have questions about this are any other issue with regard to accidents or insurance, contact Rick Freeman.
