Some auto insurers in Texas looking to make a quick buck had been in the habit of issuing policies that only covered a single driver, not the whole vehicle. Luckily, this might all change, since the state issued a law in early September which punishes funds that issue this kind of junk car insurance. The bill was signed into law earlier this year by Texas Governor Rick Perry and has finally been enacted by the state’s Legislature. According to the law, insurers must now inform the drivers on the limits and exceptions of their ‘named driver’ car insurance policies. The auto insurance ID cards which accompany said contracts must also include the name of the drivers insured under these policies from now on.
What is ‘junk car insurance’ and why is it called as such?
The junk car insurance policies described above limit auto insurance policy benefits to a single person. That person is named the driver on the coverage policy; in the event in which the vehicle should sustain damage while being operated by another driver, be they a member of the household or the family, the insurance policy would not protect them in any way. This, of course, is a severe limitation of what one would expect from insurance coverage. Until now, coverage holders could be very well be caught unawares of this restriction, since Texas insurers had no obligation to list the name of the holder. They would simply walk away satisfied with the lower price they paid on their car insurance premium. And, to their great surprise, in the event of an accident with another driver, they could very well discover they were completely uninsured.
House asks for elimination of junk car insurance policies
Although the Texas Legislature did vote the bill into force, there was some debate regarding the fate of the existing junk car insurance policies. The members of the House were in favor of doing away with them altogether, but their opinion was not shared by the Senate.
In the meantime, several consumer watch groups, such as Texas Watch, are drawing an important alarm signal regarding junk car insurance. According to the statement of one such consumer group representative, there are some 1.2 million active named driver insurance policies at the moment in Texas. And the same spokesperson warns that their number is going up, giving rise to more and more contentious situations, which involve accident victims. This statement is supported by figures recorded in North Texas, which attest to complaints filed against insurers that sell named policies. In most of these claims, the plaintiffs decry the fact that the insurance company would not cover for damage inflicted by other drivers than those named by the vehicle insurance policies.
One such notorious case involved the daughter of the chairman of the House Insurance Committee. She was involved in accident in which her car was hit from behind by a driver, who, upon the scene, presented her with a document that attested his car was insured. Only later did she find out that the driver in question was actually not the one insured by the junk car insurance policy he’d presented her with.