How to Read Your Car Insurance Policy

Insurance documents can be difficult to understand. If you have a car insurance policy, it’s important to read it carefully and make sure everything makes sense, including all the insurance industry jargon and fine print.

Here’s what you should know about the different parts of an auto insurance policy, what each one means, and some key car insurance terms.

Parts of a car insurance policy

Car insurance policies vary by car insurance company but typically include these elements:

• Declarations page: Also known as the “dec page,” the policy declarations page is a summary of your coverage, limits, premiums, and deductibles. It can give you a quick overview of your policy.^[1]

• Definitions: The definitions section defines key terms your policy uses. Most of these terms are industry terms the average person might not know.

• Coverage: In the coverage section, you’ll learn about your specific coverage. This may be liability, collision, comprehensive, uninsured/underinsured, personal injury protection, and/or medical expenses coverage.

• Exclusions: Exclusions will outline any circumstances or perils that your policy won’t cover. For example, if you have a liability-only policy, you won’t have coverage for glass damage, accidents with animals, and vandalism, and they’ll be in this section.

• Endorsements: Often referred to as riders, endorsements are changes or additions you’ve added to your policy. A few examples of car insurance endorsements include rental car reimbursement and roadside assistance.^[2]

• Cancellation terms: The purpose of the cancellation terms section is to explain how and when you or your insurance company can cancel your policy. It might state that you have to give your insurer at least 30 days notice when you cancel, for example.

• Contact information: Your policy will explain how to contact your insurer or insurance agent to ask a question, make a change, or file a claim.

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What’s on a car insurance declarations page?

A car insurance declarations page lays out all the key components of your policy. If you want to know what your auto insurance covers, it’s a good place to turn to. In most cases, a declarations page will be the first page of your policy and include the following information:

• Insurance company details: You’ll see the name of your insurer, its logo, and its contact information. If you used a local agency or car insurance agent to buy your policy, you may find its information as well.

• Policyholder information: This includes the name of the person or people listed on the policy. Policyholders may be you, your spouse, or your children.

• Vehicle details: A list of all the vehicles your policy covers, including their makes and models and vehicle identification numbers (VINs), will be present.

• Policy number: This is a unique number you’ll receive when you buy a car insurance policy. It helps the insurer find your policy when you file a claim or make changes to it.

• Policy term: The policy term or policy period states how long your car insurance coverage is valid. Most terms are six or 12 months.

• Coverage types and limits: In addition to the types of coverage you chose, the declarations page will list coverage limits or the maximum amounts the insurer will pay for each covered auto accident.

• Deductible: The deductible refers to the amount you’ll pay out of pocket before your car insurance coverage kicks in and covers the rest.

• Premium: This is the monthly or annual fee you’ll pay in exchange for car insurance.

• Endorsements: Endorsements you choose to add, like rental car reimbursement or roadside assistance, may alter your coverage and premium.

• Discounts: If you’re able to secure any discounts, the decorations page might list them.

• Financial institution information: You may see the name of your lender if you took out a loan or lease on your vehicle.^[3]

Types of car insurance coverage

Multiple types of car insurance coverages may appear on your auto policy, including:

Liability coverage

Liability insurance covers the other party’s expenses after you cause a car accident. It includes two parts: bodily injury and property damage. While bodily injury helps pay for injuries, property damage refers to the costs to repair or replace the vehicle.

Most states require liability insurance, which is the most affordable type of car insurance available.



Collision coverage

Collision coverage is part of full coverage and pays to repair your car after an accident with another vehicle or stationary object, no matter who’s at fault. It may save you from out-of-pocket expenses if your car sustains damage from a falling object, an animal like a deer or bird, theft, vandalism, or a severe weather event like an earthquake or hail.

You don’t have to buy collision insurance, but your lender might ask for it if you have a loan or lease on your car.



Uninsured/underinsured motorist coverage

Uninsured/underinsured motorist coverage can come in handy if you get into an accident with a driver who doesn’t have enough car insurance coverage or lacks it altogether. It can be a real lifesaver after hit-and-run accidents.

Depending on where you live, this type of car insurance may be required or optional.



Personal injury protection (PIP) coverage

Known as no-fault insurance, personal injury protection covers medical costs as well as lost wages or funeral expenses for you and your passengers after a covered car accident. PIP may be necessary if you’re in a no-fault state requiring drivers to file bodily injury claims with their insurance company instead of the at-fault driver’s insurer.



Medical payments coverage

MedPay helps pay for your medical expenses and your passengers’ if you sustain injuries following a car accident, regardless of who’s at fault. Unlike PIP insurance, which includes other losses like lost wages or funeral costs, medical payments coverage is strictly for medical bills.

What to know about deductibles

Car insurance deductibles state what you’ll pay out of pocket after you file a valid car insurance claim. 

For example: Let’s say you have a $1,000 deductible. If you get into a car accident that causes $5,000 in damage and you file a claim, you’ll have to pay your $1,000 deductible before your insurer will cover the remaining $4,000.

While a higher car insurance deductible means lower insurance premiums, it may not make sense if you’re on a strict budget or have limited savings at your disposal. Before you choose a higher deductible, make sure you can pay more out of pocket if you have to file a claim.^[4]

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Review checklist for your car insurance policy

Car insurance policies are often lengthy documents. With this checklist, you can zero in on the most important parts to review.

• Your policy number: Your policy number is on your car insurance card or the declarations page of your policy.

• Coverage types and limits: The declarations page will list an overview of your policy’s coverage and the limits that apply to it.

• Deductible: To check your deductible, look at the declarations page.

• Policy term: To find out how long your policy is valid, check your insurance card or the declarations page.

• Contact information: For questions, changes, or help with the claims process, you can contact your insurer or insurance agent using the contact details on your car insurance card or the declarations page.

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