My First Car: What is Car Insurance?

Excited to get behind the wheel for the first time? First things first—every driver and vehicle must carry insurance in Texas to protect yourself and others. Car insurance covers damage, medical expenses, and reduces the risk of a lawsuit if you’re involved in a collision. Even teens with a learner’s permit should be added to insurance policies, and many companies will allow a 15-year-old to be added at no additional cost until they receive a license. Learn more about car insurance terms, policies, and other tips to stay covered as a teen driver.

5 Insurance Terms to Know: Premium, Deductible, Liability, Collision, & Comprehensive

An auto insurance policy is a contract between you and your insurance company. You agree to pay the cost of the policy (the premium) and your insurance company agrees to pay for certain expenses if you have an accident or other covered loss. To make sure your policy provides the coverage you need when accidents or disasters strike, here are five insurance terms you should know:

1. Premium – This is the amount that you pay each month for insurance coverage. Premium amounts vary based on what the policy covers, the deductible, and the policy limit.
2. Deductible – The deductible is the amount you pay out-of-pocket before the insurance provider makes a payment. This can range from $100 to $2,000, but the lower your deductible is, the higher your monthly premium will be. Since teen drivers are more at risk with less experience behind the wheel, a lower deductible could save on expenses in the case of an accident. However, if the other driver is at fault, their insurance pays for your repairs and you won’t have to pay your deductible.
3. Liability – If you are responsible for damage or injury to another driver or vehicle, liability covers their expenses. This coverage also provides legal protection from the injured parties, helping you avoid lawsuits. If you’re in an accident but don’t have damage to your vehicle, liability coverage pays for the other vehicle without having to meet your deductible.
4. Collision – Collision insurance covers damage to your vehicle when you collide with another vehicle or object. This can include accidents with other vehicles, single-vehicle accidents, or hitting stationary objects, like a sign or guardrail.
5. Comprehensive – Comprehensive insurance provides more coverage for damage caused by unexpected events, including vandalism, theft, tree or hail damage from extreme weather, fire, or hitting an animal or other objects.

The minimum car insurance requirement is liability insurance, and in Texas, teens must meet the same minimum coverage¹ as adult drivers. This amount of liability coverage is called 30/60/25:

• Bodily injury - $30,000/person and $60,000/accident
• Property damage - $25,000/accident

Since teens statistically have a higher likelihood of causing an accident, consider additional policies. Learn more about collision vs. comprehensive coverage in our article “Benefits of a Comprehensive Auto Policy”.

Benefits of Additional Insurance

Teens could benefit from additional insurance policies, including uninsured/underinsured motorist coverage, personal injury protection (PIP), towing and rental reimbursement, accident forgiveness, and more. Here’s a closer look at these insurance types:

• Uninsured/underinsured motorist coverage — If you’re in an accident with a driver who doesn’t have insurance or enough liability to cover damages and they’re at fault, your policy covers damages to your vehicle.
• Personal Injury Protection (PIP) — This coverage pays for medical bills for the driver and passengers after an accident, regardless of who is at fault.
• Towing and rental reimbursement — This covers the expense of towing your vehicle to a nearby car repair shop and the cost of a rental car if needed while your vehicle is being repaired or replaced.
• Accident forgiveness — Some policies include this feature to forgive expenses of an accident if you’ve been a responsible driver without an accident after a set number of years. You may also purchase this coverage as an add-on without waiting for the time limit for an accident waiver.

Factors that Determine Insurance Costs

Besides the driver’s age, demographics, and driving history, your location, and the coverage amount determine your car insurance costs. Details about the vehicle, like the make and model, mileage, and ownership status, also play a factor. For example, an older vehicle that has a proven track record of reliability will require less insurance than a brand-new sports car that is more expensive to replace. Research older vehicles to make sure that a certain model hasn’t had recalls, since this also influences the costs.

While teens have the highest rates because you’re new to driving, several insurance companies offer discounts that are worth researching. These include discounts for good grades, using a mobile app to show you’re not driving distracted, carrying more than one car on the policy, or being insured for 12 months or more. For more details on auto insurance for teens, read the comprehensive guide at tdi.texas.gov.

Stay Insured to Avoid Penalties

Texas has strict laws for uninsured drivers, with the first offense bringing a fine anywhere from $175-$350. The Texas Sure program also flags drivers who remain uninsured, which brings tougher penalties. These include having your driver’s license or vehicle registration suspended and fines up to $1,000.

Get a Quote from Texell Insurance

Texell Insurance agents pave the way by shopping multiple leading insurance providers on your behalf. To get a quote, visit TexellInsurance.com or call 254.774.5181.

¹ Auto insurance guide from Texas Department of Insurance.

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