How to Read Your Car Insurance Policy: The Complete Guide
Getting Comfy with Your Car Insurance Policy
A car insurance policy isn’t exactly light reading. And with pages upon pages of legal jargon and insurance terms, it might seem like an intimidating read to the layperson. But it’s important to know your way around a car insurance policy so you don’t end up with any surprises if there’s an accident and you need to file a claim.
Understanding the basic elements of a car insurance policy can make all that verbiage a lot less daunting. And it’s empowering when you’re able to make sure you have all the kinds of coverage you need, as well as knowing what you pay for in your monthly premiums.
What a Car Insurance Policy Is and How to Understand Its Contents
Simply put, a car insurance policy is a legal contract between you and your insurance company that details the auto coverage your insurer agrees to provide for the price you agree to pay.
Your car insurance policy details the specifics of your coverage. It’s written in legal terms to provide a precise, thorough description of the terms of the agreement, so it’s important to read the policy carefully. It may help to have access to your car insurance policy online so you can go back to it for a reference as needed.
The typical car insurance policy format includes of two main sections:
The first is the declarations page, which sums up what the policy covers and who it insures.
Second is the policy form, which spells out the insuring agreement between you and your insurance provider, as well as providing in-depth explanations of the exact terms of your coverage.
The following can serve as a template for what your car insurance policy might look like:
A Guide to Reading Your Car Insurance Declarations Page
Usually the first page of your policy is the declarations page, or “dec” page. It consists of a basic overview of your coverage and provides several important details about your policy. Here are some of the specifications:
1) Your Policy Number
Your car insurance policy number is a unique eight to 13 digit number your insurer uses to identify your policy. You will need your policy number to provide proof of coverage if you get pulled over or get into a car accident. Law enforcement will check your car insurance policy number to verify your coverage. Your insurer may also need your car insurance policy number to look up your policy.
In terms of how find your insurance policy number, you can locate it at the top of your declarations page. It’s worth noting that policy “numbers” may include both letters and digits. A car insurance policy number example might be 9876543210, or it could be XYZ 987654. Believe it or not, you actually can have two car insurance policies on the same vehicle, as long as you obtain the policies from two different insurers. Make sure to keep your policy numbers straight if you have multiple policies.
2) Insured Drivers
The top of the declarations page will list the names of all of the drivers your policy covers as “named insured”. The list should include anyone in your household who drives the vehicle, or vehicles. The first person on the list is considered the primary named insured on the policy.
3) Personal Information
The policyholder’s primary address and other personal information will also appear at the top of the declarations page.
4) Policy Term
This indicates when your car insurance coverage starts and when it expires. This is a good place to check your car insurance policy status, as well as when you will have to renew.
5) Coverage, Limits, Deductibles and Premium
If you are looking for what the limits of your car insurance policy are, this section lays out the types of coverage you’ve purchased, the maximum amount each type will pay, your out-of-pocket deductible, and your premium for each level of coverage.
Car insurance policy types listed here would include required liability coverage for injuries and property damage, as well as optional coverage types such as comprehensive, collision, personal injury protection and uninsured motorist coverage.
What to Look for on Your Car Insurance Policy Form Page
The next section after the declarations page is the car insurance policy form, also known as a coverage form. This section defines the terms of your policy and outlines the types of coverage you’ve purchased. It includes the insuring agreement between you and your insurance provider, and it details your policy’s conditions, exclusions and endorsements.
1) Binding Insuring Agreements
This is what legally binds the insurance provider and the car insurance policy holder. It specifies exactly what risks the insurer promises to cover in exchange for the premium payment. Policies often contain a section labeled “insuring agreements,” but there may be other agreements deeper into the policy. The policy may refer to an insuring agreement as a “coverage.” Many policies contain multiple types of coverage, and each coverage area in the policy will include an insuring agreement statement.
2) List of Conditions
The car insurance policy terms and conditions section lays out all of the insurance company’s coverage obligations, as well as what’s required of the policy holder, such as premium payments and how to file a claim or cancel the policy. An insurer may promise to provide coverage only under certain circumstances and if the policyholder has met all obligations of the car insurance policy terms.
3) Any Exclusions
No policy covers everything. The exclusions section of the policy explains, in explicit detail, what exceptions there are to your coverage. It’s worth noting that exclusions vary by state and by driver, so it’s essential to read through this section carefully. Typical exclusions include catastrophic events like war or intentional damage or injury. Policies generally exclude coverage for damages and injuries that take place while a car is used for ride sharing, deliveries or racing. You could also include an endorsement if you have purchased a non-owner car insurance policy, which provides coverage if you are driving a vehicle you do not own.
4) Auto insurance Riders
Also known as endorsements, riders are add-ons that allow you to tailor your car insurance policy to fill any coverage gaps or uninsured events. You can add or take away or modify types of coverage to suit your personal needs. For example, you can pay for extra coverage such as roadside assistance, expanded protection for a new car, or to cover transportation costs in case your insured vehicle needs repairs.
5) Definitions of Terms Used
Since policies are full of hard-to-understand words and phrases, there’s usually a list of definitions in bold print to explain the meaning of certain terms. This can be a useful section for answering any car insurance policy questions that may arise.
6) Your Insurance ID Card
Your policy should include access to an insurance ID card, which you can download to keep one copy in your card and another copy in your wallet. The card will contain your name, address, vehicle details, policy period and your insurer’s contact information. You can also find your policy number on your car insurance card.
You should be able to download a copy of your policy and ID cards from your insurer’s online portal, which may offer additional tools such as a car insurance policy sample and other documents to help you navigate the process.
Reading Your Car Insurance Policy Recap
It’s important to remember that getting your auto insurance policy only fulfills your legal obligation to drive your car in your state. You also have a personal obligation to make sure you understand what is really written in your policy, as well as what it means.
When you receive your policy, give it a good read to make sure all coverage and limits are clear so you know what you are carrying if and when the need arises. Also, it’s a good idea to mark your calendar for when your premiums are due over the course of the year!
