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INSURANCE 101

Insurance in our society has become a necessary evil. I use the word necessary because the law requires individuals to maintain certain types of insurance, including automobile liability insurance and health insurance. I use the word evil because: (1) it can be very expensive and (2) insurance can be very complicated. This article is intended to give you a basic knowledge of insurance as it may apply to your personal injury case.

1. Automobile Liability Insurance:

Every driver in the State of Texas is required to be covered by liability insurance. Liability insurance will pay any damages that are caused unintentionally by any person covered by the policy up to the stated policy limit. The minimum required policy limit in Texas is 30/60 or $30,000.00 per accident and $60,000.00 per occurrence. In other words, if one person’s claim for injuries exceeds $30,000.00, the most the insurance company will pay that person is $30,000.00. If ten (10) people make claims for injuries arising from the same accident, the maximum the insurance company will pay all of those ten (10) people in total is $60,000.00, regardless of the extent of their injuries.

As a practical matter, it is unnecessary to purchase more insurance than is required by Texas State Law unless you have assets to protect such as boats, recreational vehicles or money in the bank (your home is generally exempt). You should carry enough liability insurance to protect all of your non-exempt assets. Another benefit to carrying low limits is that any case against you will more likely settle. The downside of having only $30,000.00 of liability coverage is that you will only be able to purchase the same amount of uninsured motorist coverage.

2. Uninsured/Underinsured Motorist Coverage:

All insurance companies in Texas are required to offer uninsured motorist coverage as part of their policy. It is not mandatory that Texas drivers purchase uninsured motorist coverage. However, if you do not purchase uninsured motorist coverage, you must sign a form expressly rejecting it. If you do not sign that form, you are automatically deemed to be covered by uninsured motorist coverage.

While not required, it is highly recommended that every driver in Texas carry uninsured motorist coverage. Studies show that between 25-50% of drivers on Texas roads, depending on the region, are driving without the mandatory insurance requirements. This means if you are injured by an uninsured driver, there will be no way for you to recover for your injuries. On the other hand, if you are injured by the negligence of an uninsured motorist and you are covered by an uninsured motorist policy, your insurance coverage will pay you damages caused by the uninsured driver up to your policy limit.

By way of example, if you are hit from the rear by an uninsured driver and your claim against that driver is worth $25,000.00, your insurance would pay you $25,000.00. Also, because uninsured motorist coverage is “no-fault” coverage, your rates will not increase if you make a claim for benefits under that part of your insurance policy.

Included in uninsured motorist coverage is underinsured motorist coverage. That means if you are injured by a driver who does not have enough liability insurance to cover your claim, then your insurance company will pay the difference. By way example, if you sustain injuries because of a rear-end collision and your claim is worth $50,000.00 but the other driver only had $30,000.00 in insurance coverage, your insurance company would pay the additional $20,000.00 to you.

Uninsured motorist coverage is very inexpensive considering the value it would provide as well as the probability that you will be involved in a collision with an uninsured or underinsured motorist at some time during your life. You can purchase as much uninsured motorist coverage as you desire, but the limits of uninsured motorist coverage cannot exceed the limits of your liability coverage. In other words, if you have only $30,000.00 in liability coverage then the most uninsured motorist coverage you will be able to purchase is $30,000.00.

3. Other Automobile Coverage:

There are also additional types of coverage you can purchase that are beneficial in the event you are injured in a car crash. Personal Injury Protection (known as PIP) will pay your medical expenses that result from a car accident no matter whose fault the accident was. PIP also provides benefits for occupational therapy and other health services that may not be covered by other insurance, as well as reimbursement of lost wages. Again due to the low cost of this type of coverage weighed against the probability that the coverage will be used and the value it will provide, it is highly recommended that you purchase PIP as well.

Another type of coverage that is similar to but different from PIP is medical payments coverage or Med-Pay. Med-Pay will pay all the reasonable and necessary medical expenses you incur as a result of an automobile collision including ambulance transportation and funeral expenses. If you have basic health insurance, Med-Pay coverage may not be necessary. Another major difference between PIP and Med-Pay is that if you bring a claim against another driver for your injuries, you must reimburse your insurance company for any benefits they paid you under the Med-Pay coverage.

4. Health Insurance:

With the passing of Obamacare, it is now mandatory that everyone purchases health insurance. There are a number of significant differences in the types of health insurance that can be purchased in the marketplace and we will not explore those differences in this article.

If you are injured in a motor vehicle collision and you have hospital and medical expenses, those hospital and medical expenses must be paid by your health insurance under the conditions of the policy, regardless of who caused the collision. Like Med-Pay coverage, the benefits that are paid out under health insurance must be paid back to the insurance company if you make a claim against the other driver.

Before 2014 the health insurance was entitled to all of their money that they paid for your healthcare caused by an accident. However, in 2014 the Texas Legislature limited the amount the health insurance company can recover. That amount is generally limited to 2/3 of the total amount the health insurance company paid out. The legislature also limited the source of the health insurance company’s recovery to claims against third party drivers, as opposed to recovery from your own policy for uninsured motorist benefits.

By way of example, if you are injured in a motor vehicle collision and your claim has a value of $50,000.00, but the other driver only has $30,000.00 of insurance and you purchased $30,000.00 of uninsured motorist benefits you would have received $30,000.00 from the other driver’s insurance, plus $20,000.00 from your insurance company. If health insurance paid your medical expenses of $30,000.00, the health insurance company would be entitled to recover $20,000.00 of the $30,000.00 you received from the other driver.

Conclusion:

In summary, health insurance coverage is required to pay any medical expenses that you have incurred as a result of an accident. They may be entitled to reimbursement for a portion those expenses. Uninsured Motorist coverage and Personal Injury Protection, while not mandatory, are highly recommended due to the low cost and significant benefit those coverages provide. In the event that you don’t have health insurance coverage, it is also recommended you carry Medical Payment coverage. Remember that automobile motorist coverage in Texas is mandatory. If you fail to carry the required coverage, your car could be impounded and you could lose your driving privileges.

If you ever have any questions about insurance coverage, contact an insurance broker when purchasing coverage. If you ever have any questions regarding the payment of your claim, or your rights after you purchase coverage you should contact an attorney who practices in an area of Personal Injury Trial Law and/or Insurance Coverage.

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