How to read an auto insurance policy
Like most drivers, if you have a car, you probably have a car insurance policy. But how do you know exactly what car insurance covers? Understanding car insurance documents can take a little work, but Bankrate is here to help. Our insurance editorial team, which includes licensed insurance agents, reviewed the steps it takes to read and understand your policy so that you can be confident you know exactly what your coverage includes.
How to read and understand your auto insurance policy
Your auto insurance policy is spelled out in documents you will have received from your insurer when you purchased your coverage. Knowing how to read car insurance documents is a skill that all drivers should have so they know exactly what their policy covers, as well as any limits on that coverage. Although your policy may include numerous pages of information, it is vital that you have a general understanding of its contents.
Fortunately, there are several parts to a policy, including a section called a declarations page that summarizes the contents of your contract with your insurer. Let’s take a closer look at this page and the rest of your policy to give you an overview of what it all contains.
What are the parts of a car insurance policy?
Your policy documents will vary somewhat depending on the company from which you bought your policy but will contain most or all of the following elements:
Declarations page: Usually the first page of your policy documents, it summarizes your coverages, limits of liability, premiums and deductibles.
Insurance agreement: Outlines exactly what you and your insurer have agreed to regarding coverage, including terms, conditions and exclusions.
Definitions: defines any key terms used in the policy.
Coverage sections: May go into more detail about the specific types of coverage you’ve purchased, including liability, collision, comprehensive and more.
Exclusions: lists any situations or circumstances not covered by your policy.
Endorsements: Outlines any optional endorsements you’ve added to your policy.
Cancellation terms: Explains the conditions under which your policy can be canceled, either by you or by the carrier.
Contact information: Provides contact information for your agent and the insurance company for claims, assistance or other purposes.
Different types of car insurance
Car insurance is broken down into several categories. Some of these types of coverage are likely to be mandatory, depending on your state of residence, while others may be optional but available to provide you with more robust coverage at an additional cost.
Coverage | When it’s required | What it covers |
|---|---|---|
Required in most states | Includes bodily injury and property damage liability. Provides financial protection to pay for the other party’s injuries and damages when you cause an accident | |
May be required by state | Provides coverage for medical and hospital expenses if you or your passengers are injured in an accident | |
Required in no-fault states | Similar to medical payments coverage but can also pay for lost wages and the cost of some household expenses you can’t perform after an injury | |
May be required by state | Covers your injuries (and sometimes your property damage) if you are hit by someone, including hit-and-runs, who doesn’t have insurance or doesn’t have enough insurance to pay for your losses | |
Optional but may be required by a lender | Pays for the damage to your vehicle if the damage is caused by colliding with something, like another vehicle or stationary object, rollovers and potholes | |
Optional but may be required by a lender | Also called “other-than-collision coverage,” this pays for things like a cracked windshield, theft of the car, vandalism, fire damage, hitting an animal and weather-related losses |
Understanding your car insurance liability limits
Almost every state in the U.S. requires you to have liability coverage. This essential coverage pays for injuries or damage sustained by the other driver, their vehicle or stationary objects in an accident where you are found to be at fault.
Each state sets a minimum limit for its liability coverage. Let’s say, for example, that you live in New York. Liability limits are often written as 25/50/10. This translates into the following:
$25,000 bodily injury liability per person per accident
$50,000 bodily injury liability total per accident (i.e., if more than one person is injured)
$10,000 property damage liability
To drive legally in N.Y., you need at least this amount of coverage. However, many insurance experts recommend you purchase more than the minimum since a serious accident can cause injuries or damage that cost significantly more than the minimum. If you have minimum coverage, and an accident has a higher financial cost than your coverage affords you, you will need to pay the overage out of pocket.
What is a car insurance declarations page?
A car insurance declarations page contains a simplified version of your policy information. This includes:
Policy number: This is a unique number assigned to your car insurance policy. This helps your company find your exact policy when you make changes or file a claim.
Policy term: The policy term is the length of time your policy is valid, which is usually six or 12 months. On the auto declarations page, the term is listed with the start and end date, which is when the policy expires.
Company and agency information: Your declarations page will likely include your company’s name and logo and may include contact information as well. If you purchased your policy through a local agency, their contact information could also be listed.
Personal information: This includes the name of the policy owner or owners and the names of all the drivers listed on the policy.
Vehicle information: The year, make and model of each insured vehicle, as well as each vehicle identification number (VIN), will likely be listed on a declarations page.
Coverage types and limits: You’ll see a breakdown of each coverage type you have on each vehicle, as well as the limit and deductible (if applicable) for that coverage. You may also see a premium next to each coverage, showing how much that specific selection costs.
Endorsements: This section includes details about any endorsements added to the policy, such as roadside assistance, rental car reimbursement and accident forgiveness.
Premium: Your declarations page provides premium by coverage type and by vehicle.
Discounts: Some declarations pages show the discounts you have applied to your policy.
Financial institution information: If you have a loan or lease on your vehicle, you’ll likely see your financial institution’s name and possibly its contact information on your declarations page.
