SOURCE: TDI
Auto Insurance Guide
Auto insurance protects you financially by paying the other driver’s car repair and medical bills if you cause an accident. Depending on the kind of coverage you have, it can also pay to repair or replace your car if it’s damaged or stolen.
Texas has a Consumer Bill of Rights for auto insurance. Your insurance company will give you a copy of the bill of rights when you get or renew a policy.
Is auto insurance required?
Texas law requires drivers to show proof they can pay for the accidents they cause. Most drivers do this by buying auto liability insurance. Liability insurance pays to repair or replace the other driver’s car, or other damaged property, and pays other people’s medical expenses when you’re at fault in an accident.
If you still owe money on your car, your lender will require you to have collision and comprehensive coverage.
Learn more:
Tips to help you shop for auto insurance
Watch: What kind of auto insurance do you need?
Types of auto coverages
There are eight basic auto insurance coverages. You can choose whether to buy the others.
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Liability coverage pays to repair the other driver’s car if you caused the accident. It also pays the other driver’s and his or her passenger’s medical bills and some other expenses. Texas law requires you to have at least $30,000 of coverage for injuries per person, up to a total of $60,000 per accident, and $25,000 of coverage for property damage. This is called 30/60/25 coverage. Think about buying more liability coverage. The minimum liability limits might be too low if you cause a multi-vehicle accident or the other driver’s car is totaled. If you don’t have enough liability coverage to pay for the damages and injuries you cause, you might have to pay the rest out of your own pocket. The other driver could sue you.
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Collision coverage pays to repair or replace your car after an accident.
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Comprehensive (other than collision) coverage pays if your car is stolen or damaged by fire, flood, vandalism or something other than a collision.
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Medical payments coverage pays your and your passengers’ medical bills. It also pays if you’re hurt while riding in someone else’s car or while walking or biking.
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Personal injury protection (PIP) coverage is similar to medical payments coverage. It pays your and your passengers’ medical bills. But it also pays for things like lost wages and other nonmedical costs. All auto policies in Texas include PIP coverage. If you don’t want it, you must tell the company in writing.
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Uninsured/underinsured motorist coverage pays if you’re hit by someone who didn’t have insurance or didn’t have enough to pay your medical and car repair bills. It also pays if you’re in a hit-and-run accident. Insurance companies must offer you this coverage. If you don’t want it, you must tell the company in writing.
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Towing and labor coverage pays to tow your car if it can’t be driven. It also pays for labor to change a flat tire or jump-start your battery.
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Rental reimbursement coverage pays for you to rent a car if yours is stolen or being repaired after an accident. Some policies also pay for taxis or ride-hailing services.
Learn more: Do you need extra uninsured motorist coverage? | Watch: What are the different types of car insurance coverages?
Who’s covered?
Most policies cover you, your family, and people driving your car with your permission. Ask your agent or read your policy to know who your policy covers and if anyone is excluded from coverage.
What does my policy cover?
Coverages vary by policy and depend on the types of coverages you choose. This table shows some of the things most policies do and don’t cover. Read your policy or talk to your agent to be sure of your exact coverages.
Most policies cover:
Damage to your car because of fire, hail, theft, flood, flying gravel, or hitting an animal (if you have comprehensive coverage)
Accidents that happen while you or someone covered by your policy is driving a rental car
Accidents that happen while you’re driving in other states and Canada
Your attorneys’ fees if you’re sued because of an accident
Car repair, lost wages, and medical and funeral bills to the other driver and passengers if you cause an accident
Most policies cover:
Accidents that happen while you’re driving for a ride-hailing service or delivering food or other items for a fee
Accidents that happen while you’re driving a car that doesn’t belong to you but you could use regularly, like a company-owned car
Equipment not permanently installed in your car
Accidents that happen while you’re driving in Mexico, driving for business, or racing
Damages that you caused intentionally
What happens if I buy a new car? Is it covered?
If you get a new car, your current insurance will automatically cover it for about 20 days. The type of coverage depends on whether the car is an additional or replacement car.
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An additional car gets the same coverage as the car with the most coverage on your policy.
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A replacement car gets the same coverage as the car it replaces on your policy.
Tell your company about a new car as soon as you can to avoid a lapse in coverage.
Am I covered if I’m driving someone else’s car?
Rental cars.
Rental agencies offer damage waivers and liability policies. The damage waiver isn’t insurance. It’s an agreement that the rental agency won’t charge you for damage to a car you rent.
You might not need the rental agency’s liability policy if you’re driving a rental car for personal use. Your own auto policy might provide coverage under your liability or comprehensive coverage. There could be exclusions that could limit or reduce your coverage. Ask your insurance agent if your policy covers you if you’re driving the rental car for work.
Before you rent a car, ask your agent whether you need the rental agency’s liability policy and damage waiver.
Learn more: Do I need to buy insurance when I rent a car?
Borrowed cars.
If you cause an accident while driving a borrowed car, the car owner’s insurance pays the claim. If the owner doesn’t have insurance - or doesn’t have enough to pay for the damages and injuries you caused - your insurance will pay.
If you don’t own a car, but borrow a car often, you can buy a nonowner liability policy that pays for damages and injuries you cause to other people while driving a borrowed car. It doesn’t pay for your injuries or damage to the car you’re driving.
If you borrow a car from a repair shop, your liability insurance will pay for damages to the car. It will also pay for other people’s injuries and damages if you're at fault in an accident. Check your liability limits to make sure they're enough to pay for the damages.
Ask your insurance agent if there are any exclusions or coverage limitations when you’re driving a borrowed car.
I’m driving into Mexico, am I covered?
Mexico doesn’t recognize American auto policies. Some companies offer endorsements for short trips into Mexico, but the coverage might not meet Mexico’s legal requirements. If you’re driving into Mexico, you should buy a Mexican liability insurance policy. Some Texas agents sell them. Your agent might be able to help you find an agent who does.
Deductibles and dollar limits
You must meet a deductible for some types of claims.
You must pay a deductible for collision, comprehensive, and uninsured/underinsured motorist claims. A deductible is the amount of a claim that you must pay yourself. For instance, if you have a $1,500 collision claim and your policy has a $500 collision deductible, the insurance company will deduct $500 from your claim amount and pay you $1,000. You don’t have to pay a deductible for claims against another driver’s insurance company.
Learn more: What to know about deductibles
Some coverages pay only up to the policy’s dollar limits.
Liability, personal injury protection, uninsured/underinsured motorist, towing and labor, and rental coverages have dollar limits. This is the most the company will pay, even if the cost is higher. If you don’t have enough coverage, you’ll have to pay the difference yourself. Collision and comprehensive coverages don’t have dollar limits.
The first page of your policy is the declaration page. It has a summary of your policy, including your coverages, dollar limits, and deductibles.
Learn more: Shopping for auto insurance worksheet
Auto insurance for young drivers
You have two options for covering your young drivers. You can add them to your policy, or you can buy a separate policy for them. Adding them to your policy is usually cheaper.
Some companies require you to put everyone who lives with you and is of driving age on your policy. Tell your company when someone in your family starts to drive or turns 16. If you don’t tell the company, and the company learns about them later, the company will bill you for the extra premium you should have paid. The company also might deny any claims you have or choose to not renew your policy.
If a teenager is the main driver of a car, the company will base the premium on that car. Otherwise, the company will base the teen’s premium on the car in the family with the highest rate.
Watch: Teen driving safety | Adding a teen driver to your insurance policy?
Children away at school or not living with you
Some companies require you to keep young drivers on your policy, even if they’re away at school. Tell your insurance company if you have a child living in another city for school. If your child has a car, the company might charge you differently because rates are based on where a car is usually located. If your child doesn’t have a car, you might be able to get a discount on your premium. If your child is going to school in another state, check the laws in that state to make sure you have enough liability coverage.
Understanding premiums
Texas law requires insurance companies to charge rates that are fair, reasonable, and adequate for the risks they cover. We don’t approve rates in advance, but if we find that an insurance company’s rates are too high, we can require it to pay refunds to the people it overcharged. Insurance companies may appeal our decisions.
How do companies decide what to charge me?
Insurance companies use a process called underwriting to decide whether to sell you a policy and how much to charge you. The amount you pay for insurance is called a premium.
Most companies consider these things when deciding your auto insurance premium:
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Your driving record and claims history. Insurance companies will charge you more if you’ve had accidents or gotten tickets. Some companies might refuse to sell you a policy.
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Where you keep your car. Rates are higher if you live in a city. This is because people in cities are more likely to have accidents or have their cars stolen than people in rural areas. Rates can also vary between ZIP codes in the same city.
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The kind of car you have. Collision and comprehensive rates are highest for luxury, high-performance, and sports cars. Rates are also higher for cars that cost more to repair.
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How you use your car. Your rates will be higher if you drive your car to and from work or use it for business.
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Your credit score. Some companies use your credit score to decide what to charge you. To find out which companies use credit scores, visit HelpInsure.com.
Learn more: Know how auto and homeowners insurance costs are calculated | How your credit score can affect your insurance rates
Insurance companies check your claims history.
Most companies use the Comprehensive Loss Underwriting Exchange (CLUE) to learn your claims history. A company can charge you more or refuse to sell you a policy based on the information in your CLUE report. You can get a free copy of your report each year. Call LexisNexis at 866-312-8076.
Learn more: How to get a CLUE about your claims history
Your rights
An insurance company may not:
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Turn you down or charge you more because of your race, color, religion, or national origin.
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Turn you down or charge more because of your age, gender, marital status, geographic location, or disability unless the company can show that you’re a greater risk for a loss than other people it’s willing to insure.
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Turn you down, charge you more, or treat you differently than other people in your rate or risk class unless the company can show that you’re a greater risk than others.
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Turn you down or charge you more only because of your credit score.
Saving money on your insurance
Discounts help lower your premium. Each company decides what discounts to offer and the amount of the discount. You might be able to get a discount if you have:
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Airbags, antilock brakes, and antitheft devices in your car.
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Completed a defensive driving or a driver education course.
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More than one car on a policy.
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Other policies with the same insurance company.
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No claims and a good driving record.
Learn more: How you drive could save you money on car insurance | Watch: How to compare car insurance rates
Losing your insurance
If you ask, a company must tell you in writing why it turned you down, canceled, or didn’t renew your policy. You may complain to us if you think a company improperly denied, canceled, or nonrenewed your policy.
What happens if a company cancels my policy or doesn’t renew it?
Cancellation means either you or the insurance company stops coverage before your policy’s end date. A company must give you 10 days’ notice before it cancels your policy. A company may cancel your policy in the first 60 days for any reason, unless the cancellation violates a law.
An insurance company may cancel your policy at any time if:
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You stop paying your premiums.
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You file a fraudulent claim.
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Your driver’s license or car registration is suspended or revoked (this also applies to other drivers who live with you or use your car).
If either you or the company cancels your policy, the company must refund any unearned premium to you within 15 days after the date of the cancellation. Unearned premium is the amount you paid in advance that didn’t go toward coverage. For instance, say your premium is $100 a month and you paid for six months in advance. If you cancel your policy after one month, the company would owe you $500 in unearned premium.
Nonrenewal means a company refuses to renew your policy when it expires.
Your company must give you the reason for the nonrenewal if you ask. It must give you 60 days’ notice of a nonrenewal if you bought or renewed your policy in 2024 (unless you don’t cooperate in a liability claim). If you bought or renewed your policy in 2023 or earlier, it must give you 30 days’ notice.
A company can nonrenew your policy only after it’s been in effect for 12 months. This means that if you bought a six-month policy, the company can’t refuse to renew it when the first six months ends. It must renew it to give you a full 12 months of coverage.
A company can’t refuse to renew your policy because of your age. It also can’t nonrenew your policy because you had claims for:
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Weather damage.
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Damage from hitting an animal.
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Accidents or incidents that can’t reasonably be blamed on you, unless you have more than one of these claims in 12 months.
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Damage from flying gravel or other flying or falling objects (the company can raise your deductible if you have three of these claims in 36 months).
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Towing and labor (the company can refuse to renew your towing and labor coverage if you have four of these claims in 36 months).
If you get a nonrenewal or cancellation notice, start shopping for new insurance right away. Make sure you get a new policy before your old policy ends so you won’t have a lapse in your liability coverage.
If you still owe money on your car, your lender will require you to have collision and comprehensive coverages. If you cancel or lose these coverages, your lender will buy single-interest coverage and add the cost to your loan payment. This coverage is expensive and protects only the lender.
Learn more: Was your auto insurance not renewed or canceled?
What if I can’t find a company that will sell me a policy?
If you can’t find a company willing to sell you a policy, you can get basic coverage through the Texas Automobile Insurance Plan Association (TAIPA). You can get TAIPA coverage if two insurance companies have turned you down.
TAIPA sells liability, personal injury protection, and uninsured/underinsured motorist coverages. It doesn’t sell collision or comprehensive coverage or higher liability limits than state law requires.
TAIPA coverage is more expensive than coverage from other insurance companies. TAIPA also charges more if you’ve had tickets or accidents than other companies.
If you have TAIPA coverage and haven’t had any tickets or accidents for a year, your rates might go down. If you don’t have any tickets or accidents for three years, your insurance company must offer you a cheaper policy outside of TAIPA.
To get TAIPA coverage, talk to your agent.