Auto Liability Insurance
As I sold insurance, it became abundantly clear that liability insurance was one of the most mistaken coverages of clients.
Many times clients would call in and ask for liability insurance and think that it covered their own car. That is the farthest from the truth.
Let’s start with how the Texas Department Insurance (TDI) defines liability insurance, then I will attempt to break it down for you. As defined by TDI: “Liability coverage pays to repair the other driver’s car if you caused the accident. It also pays the other driver’s and his or her passenger’s medical bills and some other expenses.”
As you can see, TDI’ definition does not state anything about paying for the damage to your car. To make sure your car can get fixed if you are at-fault in an accident, you would need comprehensive and/or collision coverage. I will discuss comprehensive and collision coverage in a separate article.
Now that we know for sure that liability insurance only pays to repair the other person’s car and the medical bills and “some other expenses” if you are the cause of an accident, let’s discuss how liability insurance is sold.
I know you have heard your insurance agent tell you that the minimum insurance requirements for Texas is 30/60/25, but what does that mean?
When you hear people say 30/60/25 they are talking about how your liability is paid out.
|30 / $30,000||60 / $60,000||25 / $25,000|
This means your insurer will pay up to $30,000 for all injuries & "other expenses" for a single individual in a car that you hit.
This means that your insurer will pay up to $60, 000 for all injuries & "other expenses" for all individuals in a car that you his.
This means that your insurer will pay up to $25,000 to repair damages to a vehicle that you hit.
Summary of the minimum auto liability coverages required by the State of Texas
The first number, 30, means that if you caused an accident and someone or some persons were injured due to that accident your insurance carrier would pay a maximum $30,000 for the injuries and “other expenses” per person in the vehicle you struck. It does not mean that the individual would automatically get $30,000, but could if their injuries were severe enough to reach that limit.
The second number, 60 or $60,000, is the total amount that your insurance carrier will pay out for the injuries and “other expenses” incurred from an accident that you caused, regardless of the amount of individuals in the vehicle you struck.
Before we move on to the third number, 25, let’s take a look at how the Texas minimum requirements may not be enough coverage if the accident is severe. Let’s start with the ambulance ride. According to an article by Costhelper.com, the average cost for an individual with health insurance is “$15 to $100 or more or coinsurance is 10% to 50%” of the total insurance bill. While $15 to $100 does not sound bad, there are more things to consider. Take, for instance, those that have to pay a 10% to 50% coinsurance. According to the Fort-Worth Telegram, the average cost of an abundance ride, before insurance kicks in is $1,500. If someone is on the low end, that is $150. If someone is on the high end, that is $750 dollars. You also need to think about those without health insurance. According to An article in The Dallas Morning News written in September of 2019, 5 million people or roughly 17.7% of Texas’ total population did not have health insurance. That would start the costs off at $1,500.
You also need to consider the hospital stay, if any, any lost wages on the part of the injured, and pain and suffering. All of these cost can easily add up. The more people that are in the car the higher the costs get. Let’s not forget that in 2018 the Texas Department of Transportation recorder a total of 3,652 roadway deaths in Texas, which could be devastating to the finances and life of the person who caused that fatality.
Also, let’s assume there is only one person in the car you hit and their injuries and “other expenses” come out to be greater that $30,000. Even if those injuries do not reach the maximum of $60,000, you would personally be responsible for any amount above the $30,000, because that is the total amount your insurance carrier will pay for the injuries of one individual.
Now, let’s look at that last number, 25. This means that your insurance carrier will pay up to $25,000 to repair damages to a vehicle if you are at-fault in an auto accident.
With the price of vehicles steadily creeping higher and higher, the costs associated with repairing a vehicle that can be repaired after a car accident is also creeping higher and higher. There is also the possibility that the vehicle you strike can’t be repaired and is considered a total loss. The best selling vehicle in Houston in 2018, according to the Houston Chronicle, was the Toyota Camry. The second most popular was the Dodge Ram 1500. A new 2020 Toyota Camry LE comes in right under the $25,000 mark at around $24,329, on the low end, and a new 2020 Dodge Ram 1500 Lone Star comes in at $33,129, on the low end. While, if you totaled a Toyota Camry, your insurance would cover the total loss it would not cover the total loss of a higher priced vehicle. Also, while I have been out driving on the roads I have begun to see more and more luxury vehicles on the roads, such as Teslas. As a disclaimer, I am making no notion to know how a claims representative would value the above cars. I only used the prices as an example.
So, with the minimum coverage required to legally drive a vehicle on Texas roadway, 30/60/25, there is a risk of you becoming liable to pay a portion of the amounts for injuries and vehicle damage that you have caused out of you own pocket.
I would highly suggest that you speak to you agent to review your specific situation and discuss the options available too. 30/60/25 may work for some but for others it deserves at least a conversation with your agent.
In my next article, I will discuss how to cover your vehicle in the event of an accident. In later articles I will discuss protecting yourself and your passengers for injuries sustained in a auto accident as they are not covered by liability insurance.