In the last blog, we discussed basic liability definitions and the state minimum coverage limit requirements. In this blog, we will dive deeper into auto liability limits, covered drivers and vehicles and common exclusions.
Texas Auto Insurance: Liability – Coverage Limits (yep, there’s more!)
While the State of Texas only requires liability limits of 30/60/25, there are many scenarios where having this amount would not be sufficient to protect your finances and assets. We gave some examples of how you would be held responsible for any amount of damages that are above the limits set forth in your policy.
You don’t have to stick with the state minimum liability requirements. In fact, we recommend you purchase much more than the state requires. Often times our clients are surprised to learn that the cost for additional liability coverage is miniscule. Though the cost is small, the potential benefit is huge!
Let’s go back to liability coverage limit basics for just a minute.
Auto insurance companies offer liability limits in two ways:
Split Limits
such as in the case of what the State of Texas requires (30/60/25) – where the bodily injury and property damage amounts are split and each category has its own sub-limit. Some examples of increased liability limits are: 50/100/50, 100/300/100, 250/500/250, etc.
Combined Single Limit – The Bodily Injury per person and per accident, as well as the Property Damage per accident, are all lumped together into one liability limit. A commonly seen Combined Single Limit (CSL) is $300,000. That means that there is no sublimit for Bodily Injury or Property Damage – the insurance company will simply pool the damages all together and apply them to the policy limit until the policy limit is reached. The Combined Single Limit is the maximum limit of liability (the most the insurance company will pay) for all damages resulting for any one covered auto accident. Some companies offer a Combined Single Limit up to $1,000,000 while other companies max out at $500,000.
As you can see, there are a wide range of auto liability limit options to choose from. Here are some reasons to consider increased auto liability limits (this is not a complete list!):
- Increased protection if you’re at fault in an auto accident – depending on your limits, you won’t have to worry about selling your assets to pay for the injuries/ damages
- Higher net worth = more liability coverage to protect yourself from losing everything you worked so hard far.
- If you have insufficient liability limits, your wages could be garnished or you could be forced to sell your assets to cover the damages above your policy limits.
- Increased defense in the case of a lawsuit against you due to an auto accident. Remember that even though defense costs are paid on top of the policy limits, the defense ends when your policy limits are reached. Higher limits mean higher potential defense for you!
- Medical costs are ever increasing. The Texas state minimum Bodily Injury amount of $30,000 does not go very far in regards to hospital bills.
- Car repair costs have skyrocketed. In addition to medical costs, car repairs have gotten more and more expensive. This due to the increase cost of the parts themselves and the labor to repair, but also there is so much safety technology that must be recalibrated/replaced.
- Teen driver in the house? We all know that teens are higher risk drivers (we’ve all been there) because they lack experience (among other factors)
- Live in a nice area? Around DFW– Southlake, Colleyville, Grapevine, Westlake – there are countless expensive vehicles. Some that cost as much as a decent house. Causing a collision with just one of the vehicles could easily max out the state minimum liability limits. Hitting two? You’ll likely find yourself on the hook for thousands in repair bills once that $25,000 is maxed out.
- In the name of altruism – if you were to cause an immense amount of damage to someone’s property or bodily injury/death, wouldn’t you want the other person’s family to be taken care of?
A couple of more details about Bodily Injury and Property Damage:
Bodily Injury – Cars are getting safer and safer, however accidents are getting worse and worse. Hospital bills, lost income, funeral expenses… According to TXDOT there was a 7.54% increase in motor vehicle deaths in 2020 as compared to 2019. Even though there were fewer cars on the road, there were more fatalities.
Property Damage – Not just limited to other cars…Property Damage may include damage to motorcycles, houses, fences, store fronts, etc.
Okay, moving right along….let’s talk about Covered Drivers and Vehicles.
In order to find out how your insurance policy would/would not respond in the case of an auto accident, you must read your Insurance Policy Jacket/Contract. The Policy Jacket/Contract is the very long document that contains things like Definitions, The Insuring Agreement, Coverages, Your Duties After a Loss and Exclusions. It is your responsibility to read your insurance policy.
Drivers
When it comes to auto liability insurance, the insurance company is going to have a definition of which drivers are considered “Insured” under the policy. In most cases, all household members of driving age must be listed on your policy and you must choose to include them as a driver to be covered or exclude them from coverage. If you exclude a household member, it means if they drive one of your cars and cause an accident, the insurance company is not responsible to pay or defend for any damages they cause. Some policies allow for Permissive Use and some don’t. Permissive Use means giving someone express or implied permission to operate your vehicle.
Vehicles
The insurance company is also going to have a definition of what vehicles you will be covered on while driving. For example, they will define the term, such as “Your covered auto” and will give a list of characteristics that define what kinds of vehicles are covered under the policy. It is here that the insurance company will outline if there is any liability coverage for rental vehicles, newly acquired additional or replacement vehicles (and if there is any automatic coverage, how long the coverage is extended), trailers, etc.
Texas Auto Insurance: Common Exclusions (not a complete list – read your policy!)
Of course, as with any insurance policy there are going to be certain things that are excluded from coverage. Here are some examples of what is generally excluded:
- Intentional Acts – If an insured intentionally causes Bodily Injury or Property Damage
- Property damage to property owned or being transported by any insured.
- Property damage to property rented to, used by, or in the care of any insured.
- Bodily Injury to an employee of the insured
- Punitive or Exemplary Damages
- Liability arising out of leasing your vehicle to others
- Liability arising out of criminal act or omission of the insured.
- Any liability that arises out of the ownership or operation of a vehicle while it is used for delivery, livery, transportation network such as Uber, Lyft, UberEats, Doordash, pizza delivery, etc.
- Business Use
It’s important to talk speak with your licensed agent if you will be using any of your vehicles for business purposes. Though business purposes are usually excluded from a personal auto policy, there are ways to amend your policy with certain companies that will actually provide auto liability coverage for certain kinds of business use.
Conclusion
If you’ve read this far, Bravo! We have covered some material that is surely great bedtime reading. No one really likes to talk about insurance, but when it’s time for the insurance to step in and help it can sure be relief to have had a thoughtful conversation about all of the coverage options. I think there’s just enough material to have one more blog about auto liability insurance. In the next blog we will discuss Supplementary Payments as well as discuss some other elements of liability insurance that didn’t quite fit into the previous categories.
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.
Contact Us!
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 info@neighborschoiceins.com. We want to help you meet your goals, and make sure what’s important to you is protected!
Wendy Caplinger is owner and insurance agent at Neighbor’s Choice Insurance Agency, Inc. in Grapevine, Texas. She has held her Property and Casualty Insurance License in Texas since 2008. She received her BBA in Finance from The University of North Texas and has 15 years of experience in the insurance and financial industries. Her interest and knowledge in insurance and finance, as well as her ability to see often unnoticed risk has allowed her to drive efficiency and growth within Neighbor’s Choice Insurance.
