Texas Drivers See Changes to Insurance Exclusion, Proof Laws

One upcoming law will soon change the way insurers warn Texans against letting drivers in their households behind the wheel of their cars while another recent law has already changed the way Texans can prove their vehicles are insured.

Bill Sets Stricter Rules Around Household Exclusions

In some cases, auto insurance policies provide coverage for the policyholder named on the policy and anyone he or she gives permission to drive the car. But in other cases, the specifics of the policy limit coverage only to whoever is explicitly listed on the policy. The latter are called “named-driver” policies, and they can help policyholders living with teenage and high-risk drivers from having to pay huge sums for coverage.

Next month, policyholders with these “named-driver” policies who let household members not listed on the policy drive their car can’t say they didn’t know that they wouldn’t be covered.

SB 1567, signed into law in June, requires Texas car insurance companies to obtain a written and oral disclosure from a policyholder that he or she understands that lending a driver residing in the household—an undoubtedly common occurrence—is only allowed if that driver is named on the auto policy—something that is not as undoubtedly known among consumers.

“Most drivers buy personal auto insurance to meet the state’s financial responsibility law that requires a person to pay for an accident the person caused,” according to the bill, but the named-driver requirement is not well known to the common driver, who consumer advocates say are “often not aware of this limitation in coverage.”

The insurer must receive a signed written disclosure from the applicant “before accepting any premium or fee” for the policy. The insurer or agent must also orally disclose that the applicant may not allow unnamed household parties to use the vehicle.

The bill applies to any auto coverage policy that specifically doesn’t protect drivers “residing in a named insured’s household” unless they are named on that policy.

The bill passed final votes of 143-2 and 31-0 in the state House and Senate in May, respectively, and goes into effect on Sept. 1.

The law, when in effect, applies to auto policies issued or renewed on or after Jan. 1, 2014.

Electronic Proof Is On in Texas

An already-in-effect Texas auto insurance law is easing the way motorists in the state prove that they have valid coverage.

Texas’ SB 181, signed into law by the governor there in May, allows motorists to use their smartphones or similar electronic devices to offer authorities proof of coverage.

Electronic proof of coverage has propagated since the lead-off “e-card” bills, as they are dubbed by the industry, were passed in Idaho and Arizona last year.

Now, with a majority of states having laws authorizing the use of e-cards, many major car insurers offer their customers electronic versions of policy ID cards through smartphone apps like State Farm’s Pocket Agent.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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