What is auto insurance?
Auto insurance helps pay for damage and injuries from an auto accident. The most common types of auto coverage are:
- Physical Damage
- Uninsured/Underinsured Motorists (UM/UIM)
- Medical Payments (Med Pay)
- Personal Injury Protection (PIP)
Liability coverage pays for other people’s injuries or damage to their property when it is your fault.
There are two types of liability coverage for auto accidents:
- Bodily Injury (BI) pays if you hurt someone.
- Property Damage (PD) pays to fix or replace someone else’s car or property.
Texas law requires that car owners and drivers be able to pay for damages caused in an auto accident. This is called “financial responsibility.” Most people buy liability insurance to meet this requirement. You must have at least “30/60/25” coverage. This means: $30,000 for each person hurt, up to $60,000 max per accident for all bodily injuries (no matter how many people are hurt), and up to $25,000 for property damage per accident.
for each person hurt
max per accident for all bodily injuries
for property damage per accident
Physical damage coverage pays for damage to your car. If your car can’t be fixed (totaled), the insurance company will often pay its actual cash value (ACV). ACV is the amount your car was worth before it was damaged. You usually have to pay a deductible, which is the amount you pay out of pocket for each claim.
You will have to buy this coverage if you lease your vehicle or have a car loan.
Types of physical damage coverage are:
- Collision pays for damage to your car when you hit something. It does not matter who is at fault.
- Comprehensive, also known as “Other than Collision,” pays for damage to your car caused by something other than a car wreck, such as theft, fire, flood, and hail.
Did you know that hitting a bird or animal is a comprehensive claim, not a collision claim?
Uninsured/Underinsured Motorists (UM/UIM)
UM/UIM coverage pays if your property is damaged by an uninsured driver or by a driver who does not have enough insurance. It also covers you or your passengers if any of you are hurt. UM/UIM has two types of coverage for accidents:
- UM/UIM Bodily Injury (BI) pays if you or any person in your car is hurt.
- UM/UIM Property Damage (PD) pays to fix or replace your property. There is a $250 deductible.
Auto insurance companies must offer you UM/UIM coverages.
If you choose not to buy UM/UIM, you must reject it in writing.
A driver with no insurance hits your car.
With UM/UIM: Your insurance will pay to fix your car.
Without UM/UIM: Your insurance won’t pay to fix your car.
Personal Injury Protection (PIP)
PIP coverage pays for some medical, funeral, and other costs no matter who is at fault. For example, PIP pays 80% of your lost income. You, your family members, and your passengers are usually covered under PIP. Insurance companies must offer to sell you PIP coverage.
If you decide not to buy PIP, you must reject it in writing.
Medical Payments (Med Pay)
Med Pay coverage pays for some medical or funeral costs for you and others hurt or killed while riding in your car, no matter who is at fault. It also usually pays if you or family members are hit as pedestrians or riding in another car.
More Terms to Know
Claim – a request made to an insurance company to pay for damage or injury.
Claims adjuster – reviews the loss to figure out what is covered under the policy, if liability exists, and how much is owed.
Coverage – the damage or injuries an insurance company agrees to pay for under the policy.
Deductible – the amount you owe in a loss before the company pays its part.
First-party claim – a claim filed by you against your own insurance policy.
Policy – a contract between you and the insurance company. The policy tells you what’s covered and what the insurance company is required to pay.
Policy period – the period of time your policy provides coverage.
Third-party claim – a claim filed by you against another person’s insurance policy.