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Understanding Texas Car Insurance Policy Limits

After a Texan purchases auto insurance coverage, a legal agreement is formed with the insurance company. This agreement is a contract with obligations and rights relating to both parties.  The purchaser of the insurance policy pays a premium to avoid uncertain losses and the possibility of not having the financial resources to pay for injuries caused to another.  Among other contractual devices, insurance companies carefully dictate the financial burden they agree to carry for the purchaser by setting forth policy dollar limits.  A policy limit is the maximum amount of financial liability the insurance company is willing to incur on behalf of the policy purchaser.  Insurance companies usually correlate policy limits with the amount of premium paid by the purchaser.  The minimum amount insurance companies may offer as policy limits is governed by Texas state law.

Liability policies pay for damages to the person and property of the victim of an accident where the purchaser of the policy is shown to be responsible.  Due to a rising price in health care and inflation, minimum liability policy limits in Texas have been considered by some to be too low to fully compensate those injured in a car wreck caused by another person. The Texas legislature has addressed this problem by raising minimum insurance policy limits in 2007 and again at the beginning of 2011.  The minimum insurance policy limits in Texas are currently $30,000.00 for each injured person and a “per wreck” limit of $60,000.00 when there are multiple injured parties.  The Texas legislature has also implemented a minimum property damage policy limit of $25,000.00.  However, the minimum limits were originally set in the 1980s to $20,000.00 which would be approximately $55,000.00 in today’s dollars after adjustments for the value of the dollar.

In Texas, insurance companies have a duty to defend the purchaser of the policy against any claim with in policy limits and scope of coverage as determined by the insurance contract. When the purchaser of the policy causes the car wreck, insurance companies have a duty to take financial responsibility for injuries or damages to other persons within the scope of coverage of the insurance policy.  However, the insurance companies are usually only financially responsible for the amount set forth in the policy limits.  The purchaser is liable for any amount of damages in excess of the policy limits if the injured party in the car wreck does not settle for the policy limits.

Specifically, in cases where policy limits of insurance coverage do not fully compensate those injured in car wrecks caused by the policy’s purchaser, the individual purchaser can be held liable for the difference.  Texans can protect themselves from not being fully compensated by the at-fault driver by purchasing what is called “underinsured” motorist coverage on their own policy.  The limits for underinsured motorist coverage are limited.  The limits cannot be more than your liability limits.  For example, if you have the minimum liability limits of $30,000.00, then you may only purchase up to $30,000.00 in underinsured motorist coverage.  Texans may also purchase personal injury protection coverage which has a minimum policy limit of $2,500.00 and medical payments coverage.  In Texas, the waivers of underinsured motorist coverage and PIP coverage must be made in writing when you buy your insured policy.

In some cases, Texas law allows for insurance companies to be held liable for damages above the stipulated policy limits when they fail to accept an offer to settle which is at or below policy limits.  When a reasonable settlement demand is made against the purchaser of the insurance policy within the policy limits, the insurance company has a duty to settle the claim and not expose the purchaser (i.e., you) to personal liability in excess of the policy limits.  In cases where the insurance companies fail to meet this duty, they could be held liable to the purchaser for damages in excess of the stipulated policy limits for bad faith and unfair settlement practices.

The attorneys at the Amaro Law Firm are experienced in handling 1st party insurance and 3rd party insurance claims.  If you have any questions or concerns about insurance policies and the types of insurance coverage, please contact us for a free and confidential consultation at 1-877-892-2797.  There are no fees if there is no recovery.


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