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What You Need to Know About Auto Insurance Coverage

When you initially buy car insurance, you're probably focused on what the insurance is going to cost and the amount of coverage you have in case you get sued. While those are obviously important concerns, people don't always focus on all the various types of coverage available and whether it makes economic sense to purchase insurance beyond general liability coverage. If you buy auto insurance through an insurance agent, the various possible coverage options should be explained to you, but many times they're not. If you buy the insurance policy online, rarely do you get good advice on what types of coverage you really need; instead, the entire focus is on the price of the coverage. Ultimately, the type and amount of coverage you have doesn't really matter until the wreck happens-and then it suddenly becomes the most important thing.

In Texas, it's mandatory to carry liability insurance. This insurance covers (or pays for) the damages caused to someone else due to the negligence of the insured driver. Liability insurance covers the owner of the car and any driver who the owner gives permission to drive. Texas law currently requires that each vehicle owner carry liability insurance coverage of at least $25,000 per injured person with a $50,000 limit per accident. This is referred to as the "minimum limits." A minimum limits policy also provides coverage of $25,000 for damage to someone else's property.

If you're in an accident and the other driver is at fault and only insured for the minimum limits, the most you can recover from the other driver's insurance company is $25,000 for your bodily injury claim and $25,000 for the damage to your vehicle. If there are multiple people hurt in the wreck, then the "per accident" limit might come into play. For example, let's assume that Tom only has minimum liability insurance. While texting his girlfriend, Tom crashes into Bob's truck, and Bill and Ben are his passengers. The crash seriously injures all three of the men in the truck. This will cause a "per accident" problem preventing Bob, Bill and Ben from each receiving the full policy limits of $25,000 per person. If they were all to receive $25,000, it would obviously exceed the "per accident" limit of $50,000. Unfortunately, Bob, Bill and Ben would have to share the $50,000 available benefit.

If the value of your damage exceeds the amount of insurance that the other party carries, then in order to obtain full compensation, the at-fault person must either pay you out of pocket or you must make a claim under the underinsured motorist coverage on your own insurance policy (if you have that kind of coverage). In a normal accident case, the likelihood that you'll be able to obtain money from the at-fault person over and above the insurance policy is extremely unlikely.

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