Texas raises liability minimums

This should be a no-brainer. Texas has been holding down its minimum liability figures for decades. When it finally decided to adjust the numbers to keep pace with inflation, it went for a staggered increase to minimize the shock. We are seeing one of the increases January 1st 2011 when state law requires every policyholder to have $30,000 for one person injured in an accident, $60,000 to pay all medical expenses for multiple victims. For those of you who like percentages, this is a 20% increase, except it's completely inadequate to restore the minimums to their original value. That would be an increase of over 700%. Yes, inflation really does wear away the value of money as time passes. Just think. During the time these minimums have been in place, your average take-home pay has increased by more than 700% and the cost of insurance has only risen a few percent a year. Indeed, insurers have predicted that there should be no significant increase in the premiums for this rise in the minimums - at most 2 or 3%.

Texans do have the option of installment plans. This is two months paid in advance and then four or ten monthly installments to complete the 6 or 12 month policy. If you do decide to go down this road, look carefully at the total cost when you add in any interest charges and fees. Sometimes it really is cheaper to load up your credit card with a six-month premium hit.

This leaves us with the question of how the Texans are feeling about this increase. Not surprisingly, the most vocal on the internet are all hostile and reflect one serious possible outcome. That an increasing number of drivers will opt not to renew their policies and take the risk of driving without insurance. This is explained by two quite different forces. One is the continuing high level of unemployment in Texas. Family budgets are under real pressure and any increase in insurance premiums is going to hit hard. The other issue is that Texas already has the second most expensive insurance rates in the US. Put the two together and this explains why Texas has now overtaken Alabama as having the highest percentage of uninsured drivers on the road.

There could be very active policing to catch and prosecute every uninsured driver. This would kill the myth that the reason for the high number of uninsured drivers is the high number of illegal immigrants. It would also reduce the resentment among those who feel their premiums are paying for freeloaders. The moment enforcement with real teeth starts taking uninsured drivers off the road, more premium income comes into the group funds and this allows the insurers to reduce the premium rates. It's joy all around when that happens. So when you get your auto insurance quotes or renewal notices, and you see the increases in the minimum rates, be thankful there will be more money to pay out your losses should there be an accident. With enforcement, there will be cheap auto insurance for everyone. That would be a good way of celebrating 2011.