Texas Auto Insurance: Liability– The Basics
Liability coverage is the most basic of auto insurance coverages. In the state of Texas, it is the only coverage required by state law. In this blog, we are going to dig deep into liability coverage and how it plays out in real life situations.
First let’s start with the basic definition of auto liability. Auto liability can be defined as damages an individual becomes legally responsible for as a result of an auto accident.
There are two main categories of damages that an individual can become legally responsible for as a result of an auto accident: Bodily Injury and Property Damage. Let’s define both:
Bodily Injury means bodily harm, sickness or disease, including death that results.
Property Damage means physical injury to, destruction of or loss of use of tangible property.
When you think about an auto accident, it’s easy to come up with an example of each of the types of damages. Bodily Injury could be as simple as a neck or back injury someone sustains as a result of being rear-ended, while Property Damage would be the crumpled up bumper that resulted from the impact of the vehicle collision.
Keeping it simple, in a basic auto accident in Texas, there is going to be a party that is deemed “at-fault”. This is the party that will be held legally responsible for the damages that resulted from the accident. Without insurance, the at-fault party would be ordered to pay the monetary damages of the not at-fault party. Depending on the severity of the damages, this could be financially devastating for an individual.
Insurance to the Rescue!
If the at-fault party has sufficient insurance coverage and accident was a covered loss, their insurance company will step in to cover the monetary damages sustained by the not at-fault party as a result of the accident, up to the limit set on your policy. Of course, there are coverage definitions and exclusions to consider that would ultimately determine how the insurance company would respond in any particular accident, but at the most basic level, this is how auto liability insurance works.
Texas Auto Insurance: Liability – Coverage Limits
Now that we have a basic understanding of what auto liability is and on the most basic level, what liability insurance covers…we can address the question – how much auto liability will an insurance policy cover?
When selecting an auto insurance policy, there are a variety of coverage limits and options to choose from. With the help of a local licensed insurance agent, you can select an amount of coverage that helps you feel secure, while not breaking the bank. Of course pricing often plays a factor in how much liability coverage you will decide to purchase – but let’s put cost aside for a minute for the sake of discussion.
In Part 1, we talked about two main categories of damages that an individual can become legally responsible for in the event of an auto accident: Bodily Injury and Property Damage. In an insurance policy, the insurance company offers different limits for each of these categories.
Remember earlier when we mentioned that the state of Texas requires auto liability insurance for all vehicles? Let’s start our coverage limit discussion with the limits required by the state of Texas.
The State of Texas requires all registered vehicles to carry auto liability limits of at least 30/60/25. We’re going to break these amounts out below:
The first number, “30”, represents $30,000 in Bodily Injury per person. So, $30,000 is the maximum amount the insurance company is responsible to pay to any one person in the event of a covered auto accident. For example:
- If you were to cause a collision that resulted in bodily injury to one person equal to $30,000, the insurance company would pay the complete limit in order to compensate the not at-fault part for their injuries.
- If the bodily injury amounted to anything above $30,000, you would be responsible to pay an additional compensation.
The second number, “60”, represents $60,000 in bodily injury per accident. This amount works in a similar way to the per person amount above, but it’s on a per accident basis. If we were to add a few passengers to the not at-fault vehicle in the example above, no matter how many passengers are injured in the accident you cause, the policy stops paying for any Bodily Injury once the payout reaches $60,000. For example:
- If there are two individuals in the other vehicle and they each sustain $30,000 in Bodily Injury, the insurance policy would pay out $30,000 to each individual at which time the policy would max out at $60,000.
- If there were three people in the vehicle and they each sustained $20,000 in Bodily Injury, the insurance policy would pay out $20,000 to each injured party and the policy would max out on the “60” at $60,000.
- Finally, if there were three people who sustained $30,000 of Bodily Injury as a result of the accident, the policy would stop paying once the payout reached $60,000 and you would be responsible for the amount over $60,000, which in this case would be $30,000.
The third number, “25”, represents $25,000 in property damage per accident. This means that in any one accident, the maximum the insurance company agrees to pay is $25,000. For example:
- If you were to cause $5,000 in property damage to another vehicle by collision, the insurance company would pay the entire $5,000.
- If you were to cause $25,000 in property damage to a vehicle, the policy would pay the $25,000, at which time the policy limit would be exhausted.
- If you were to cause a collision that totals a vehicle or hits multiple vehicles and the damage was any amount over $25,000, you would be responsible to compensate the injured parties for their property damage above the $25,000.
The liability limits of 30/60/25 would be referred to as your Policy Limits.
Remember, liability only covers damage to third parties. The Bodily Injury to you or any of your passengers would not be covered under liability insurance. Additionally, any Property Damage to your vehicle or property that is caused by you would not be covered under liability.
Texas Auto Insurance: Liability – Cost of Defense
In addition to covering the cost of Bodily Injury and Property Damage, most insurance policies include an additional provision that states they will pay the cost to defend you (as they see appropriate) in a claim or suit asking for the damages. They will pay the cost IN ADDITION TO the liability limits we discussed earlier. However, once the policy liability limits are exhausted, the insurance company will no longer have the duty to defend you.
If the accident was not a covered loss under the insurance policy, the insurance company has no duty to defend you for claims of Bodily Injury or Property Damage.
This concludes Auto Insurance 101 – Understanding Your Texas Auto Liability Insurance Coverage and Limits Part 1. In the next blog, we will discuss increased liability limits, covered losses and common exclusions.
Disclaimer: This blog is for general informational purposes only. Please remember, for specific information about your coverage and your policy, please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply.
At Neighbor’s Choice Insurance Agency, we can work with you to make sure you’ve got the insurance coverage you need, while at the same time using all possible credits and discounts to make that coverage affordable. Just give us a call at 817-421-8866 or send us a note at firstname.lastname@example.org. We want to help you meet your goals, and make sure what’s important to you is protected!