As with any legal question, the answer is “it depends.”
There are two aspects to automobile insurance: bodily injury and property damage. This article focuses on the bodily injury aspect as that tends to be the more complicated process for most people and is most often the aspect people need help with from an attorney.
(1) Why do I need car insurance?
In Texas, every driver on the road is required by law to carry liability insurance. Liability insurance protects you if you accidentally collide with another person on the road and cause injuries and/or property damage to others. When a negligent driver causes an accident in which another driver, vehicle occupants, bicyclists, or pedestrians are injured, the negligent at-fault driver may be sued to cover the medical bills, related expenses, and other damages sustained in the accident. The negligent party’s insurance (also known as a “third-party” liability insurance carrier) will cover the property damage and reasonable and necessary medical expenses incurred by the injured party. This is very important because if a driver does not have liability insurance coverage, they may be personally liable for those costs, expenses, and damages. In other words, without liability insurance your personal property and assets may be put in jeopardy if you accidentally cause injuries to someone else on the road.
Equally as important, every driver should also have uninsured motorist (UM) and underinsured motorist (UIM) insurance coverage (also known as “first-party” insurance) to cover your own medical bills, costs, and damages in the event that a negligent driver injures you but does not have liability insurance. This is discussed in further detail below.
(2) How much liability coverage do I need?
The greater your liability insurance, the greater your protection. Texas law requires a minimum of $30,000 in liability insurance coverage. However, depending on the amount and value of your personal property and assets, you may want a greater liability insurance policy. When purchasing liability insurance, keep in mind that the insurance company will only cover up to the limits of that policy for any injuries and damages you accidentally cause in a car accident. Consider whether that policy limit is enough to cover the property and assets you want to protect. For example, if you are at-fault in a motor vehicle accident and incidentally cause $50,000 worth of injuries and other damages, and you have a minimum limits policy of $30,000, your insurance carrier will cover up to $30,000 of that $50,000. This means that if the injured driver obtains a judgment for $50,000, you could be on the hook for the remaining $20,000 required to satisfy the judgment. In other words, if you have a lot of assets, especially multiple real properties (like houses or parcels of land), the injured party may be able to hold you personally liable for the amount remaining after your insurance carrier pays out the policy limits and may be able to seize any non-exempt assets. The most common liability insurance policy limits in our experience are $30,000, $50,000, $100,000, or $250,000. Although, some people have insurance policies worth $500,000, $1,000,000, or more. The amount of coverage you decide on should depend on the value of your personal property and assets and to what extent you want to protect that property and those assets.
(3) What happens if the driver that hits me does not have liability insurance?
This is a question that many people do not consider when purchasing insurance policies. Unfortunately, even though liability insurance is required by state law, many drivers fail to purchase such a policy. To protect yourself, your family, and any other potential passengers in your vehicle in this type of situation, we strongly suggest you consider purchasing an uninsured motorist/underinsured motorist (UM/UIM) policy along with your liability insurance policy. While UM/UIM policies are not required by state law, they are a very important aspect of automobile insurance. The benefit of a UM/UIM policy is right there in the title: in the event you are injured by an uninsured or an underinsured driver, you will be covered by your own policy up to the policy limits, which are generally the same as those for your liability insurance.
UM (uninsured motorist) policies activate if you are injured by an uninsured negligent driver. UIM (underinsured motorist) policies are triggered when your medical bills and related expenses are greater than the negligent driver’s liability policy. For example: Carolyn is struck by a negligent driver causing a catastrophic accident. EMS arrives and determines that Carolyn must be transported to the hospital where doctors must perform emergency surgery to stabilize her broken leg and internal injuries, after which she must stay in the hospital for a week and return for follow-up appointments. The at-fault driver had a minimum limits insurance policy ($30,000), but Carolyn’s medical bills are $80,000. Luckily, Carolyn had her own UIM policy of $100,000. Thus, the third-party carrier (the at-fault driver’s insurance) would cover up to their policy limits of $30,000 and the first-party carrier (Carolyn’s insurance) would cover the remaining $50,000. Therefore, Carolyn’s treatment will be fully covered because her own insurance made up the difference.
Don’t leave it up to other drivers to make sure you are protected if injured in a motor vehicle accident. We highly recommend purchasing UM/UIM policies to make sure you and your family are taken care of if you are ever injured by a negligent driver who is not insured or does not have enough insurance to cover all of your medical bills, related expenses, and damages.
(4) What is the difference between Medical Payments (Med-Pay) and Personal Injury Protection (PIP) and why do I need either one?
Both PIP and Med-Pay will pay for healthcare costs due to injuries sustained in an automobile accident, regardless of who was at fault. Meaning even if you caused the accident, you will still be able to recover for medical bills from your PIP or Med-Pay policy. Further, settling (and/or litigating) a personal injury case can take a few months to a few years depending on how complicated it is, and your recovery from third-party and/or first-party insurance may take some time. PIP and Med-Pay provide you with financial help at the very beginning when medical bills and related expenses can be overwhelming.
Since Texas does not allow both Med-Pay and PIP on an individual insurance policy, it is very important to understand the difference between them. PIP is generally the better option.
(a) What are the benefits of PIP?
PIP coverage is automatically included with your automobile insurance policy, unless the insurance company gets your signature to specifically reject PIP. So, if you have not provided a signature to your insurance company rejecting PIP coverage, then your policy includes PIP. The minimum required amount of PIP in Texas is $2,500. However, PIP coverage may range up to $100,000 or more. PIP will cover all your medical expenses, including but not limited to rehabilitative treatment and medical devices, and 80% of your lost wages up to the contracted PIP amount.
PIP can be “stacked” in Texas, which means if you are a passenger in someone else’s vehicle and involved in a car wreck, you could recover from the vehicle’s policy as well as your own insurance policy. PIP insurance usually covers the policyholder, passengers, and authorized drivers of the insured vehicle. Some PIP policies will compensate heirs if a covered individual dies due to accident-related injuries. It is important to read your policy to verify who is covered and in which circumstances.
(b) What are the benefits of Med-Pay?
There is no minimum amount of coverage for Med-Pay, so you could have a Med-Pay policy for anywhere between a few hundred dollars to a few hundred thousand dollars. There is no requirement that Med-Pay be automatically included with an insurance policy, and thus, it is not required to be specifically rejected with a signature. While Med-Pay will pay for medical bills directly related to a motor vehicle accident, it does not cover any lost wages. Med-Pay is similar to health insurance except you can only use it for medical treatment directly related to the injuries you sustain in the car accident and there is no deductible you have to cover before it kicks in. Like PIP, Med-Pay will only cover up to the contracted Med-Pay policy amount.
(c) Why is PIP better than Med-Pay?
The most important difference between Med-Pay and PIP is that PIP is not subject to subrogation in Texas. Think of subrogation as a form of reimbursement for the insurance company. When you have Med-Pay the insurance company has a right to recover the amount of Med-Pay paid out to you from any settlement with the at-fault party’s insurance. Think of the following simplified example: if you were to settle with an at-fault driver’s insurance company for $10,000 and you had PIP in the amount of $2,500 and that amount was paid out to you from your insurance, you would get to keep $12,500 total. However, if you had Med-Pay in the amount of $2,500 and that amount was paid out to you from your insurance, although you have received a total recovery of $12,500, you will have to pay back your insurance carrier for the $2500 in Med-Pay. Therefore, you would only be able to keep $10,000 total because your insurance carrier must be reimbursed for the amount of Med-Pay they paid out to you.
If you are injured as the result of someone’s negligence, the attorneys at the Law Offices of Gregg & Gregg are here to help guide you through the process and fight for your rights. Our experienced attorneys know how insurance companies think and how to make sure that you receive the compensation you deserve.
Please contact us at (512) 575-4262 if you have any questions about auto insurance or for a free consultation if you have been injured as the result of another’s negligence.
* Please note that this article is intended only for educational purposes and is not legal advice. Every collision is different, and it is important to speak with a local attorney to determine what steps are appropriate based on the specific circumstances of your case.
512-575-4262
