Texas Auto Insurance Laws, Minimums, Requirements

What mandatory auto insurance laws exist in the state of Texas?

• In the state of Texas, you must carry the minimum amounts of liability insurance on every car that you own.
• Before you register a vehicle in the state of Texas, you must provide proof of insurance.
• The minimum liability coverage required by Texas Law is $25,000 for bodily injury or death to one person per accident, $50,000 for bodily injury or death to two or more persons per accident, and $25,000 for damage or destruction to other property in an accident.
• Texas drivers also have the option of posting a financial bond to become self-insured rather than purchase auto insurance.
• Proof of insurance must be carried in the vehicle at all times. If you are caught without insurance, you will be fined anywhere from $175-$350 for a first offense, and the penalties increase with the second, and third offenses. On the third offense, your license will be suspended.

What is the Minimum Liability Coverage (Bodily Injury amounts per person, per accident, and property damage amounts):

If you buy automobile insurance in Texas, your policy must include minimum liability coverage of:

$25,000 for bodily injury or death to one person per accident,
$50,000 for bodily injury or death to two or more persons per accident,
and
$25,000 for damage or destruction to other property in an accident

What are the Rental Car Insurance Requirements?

In the state of Texas it is against the law to operate any motor vehicle without insurance, this includes rental cars. Rental cars must carry the minimum liability coverages required under Texas law. It is important to keep in mind that most Texas auto insurance policies include coverage for car rentals. Most credit cards provide coverage for car rentals as well, so be sure to check your auto insurance policy and/or check with your credit card issuer. If you find that your credit card and/or auto insurance policy do not cover rental cars, you must purchase car rental insurance from the car rental company. It typically costs an extra $7-$14 a day.

What are the rules pertaining to Uninsured/Underinsured Motorist Coverage?

Uninsured/Underinsured Motorist Coverage is not required in the state of Texas. Because Texas is a Tort state, most insurance companies recommend that driver’s consider carrying higher coverages than the state minimums. 

What are the rules pertaining to the exclusion from coverage of a driver living in household?

In the state of Texas, auto insurance companies can write policies that exclude household members under certain circumstances. These exclusions are listed in the exclusions section of the policy, which also includes a list of all possible circumstances that would free the insurance company from the responsibility of paying a claim. Because the excluded party will not be covered by insurance under any circumstances, even in an emergency, it is important to understand and examine your auto insurance policy carefully before signing on the dotted line.

What are the rules regarding whether a driver has prior insurance? That is, how does state law handle it if a driver has no prior insurance or has let their previous insurance lapse?

If your auto insurance policy lapses or cancels, the Texas DMV will know about it. In addition, the State of Texas has implemented a new technology program that allows law enforcement officers and designated state users to immediately verify whether a person has car insurance. If you are caught without insurance coverage and you do not provide proof of coverage within a certain amount of time (as specified in any correspondence that you may receive), your license will be suspended.

What are the rules and guidelines auto insurance companies must follow regarding the use of Personal Credit History in selecting applicants and setting rates?

In the state of Texas, it is legal for auto insurers to use Personal Credit History to help determine which products they will offer as well as rates. Your Personal Credit History may also be used to determine whether you will be making monthly or quarterly payments or if you will be required to pay the entire premium upfront. Personal Credit History is also used to create an “insurance risk score.” This score also helps determine your auto insurance rates. In order to enjoy a lower insurance premium, pay your bills on time in an effort to improve your score. This will also help improve your credit history so that in the long run, you can save money on your car insurance premium. That said, Personal Credit History is not the only assessment tool Texas auto insurance companies may use. They also consider age, gender, where you live, car make and model, how much you drive, and driving record.

Is the state a No Fault or Tort state? What does either mean to the policy owner?

The state of Texas follows a Tort System. What this means is, if you are involved in an accident, someone must be found to be the cause or fault of the accident. The person deemed at fault is responsible for all damages. Damages are usually handled through the at-fault person's insurance company. Because Texas is a Tort state, most insurance companies recommend that driver’s consider carrying higher coverages than the state minimums. 

What is the average auto insurance premium in this state? As of what year?

As of 2006, Texas resident’s average insurance premium was approximately $820, the 20th most expensive in the nation. This was down 4.3% from the previous year. The national average was $817.

Sources

Insurance Information Institute

Texas Department of Insurance