A Guide to Understanding Your Car Insurance Policy
If you drive a vehicle, you need car insurance. In fact, it’s required by law in nearly every state. If you are found to be driving without car insurance you may face fines, a suspended driver’s license and possibly jail time.
With that in mind, what exactly is a car insurance policy, and what does it cover?
What is Car Insurance?
Car insurance is designed to protect drivers against financial loss caused by an auto accident, auto theft or other catastrophe. You hope you don’t need it, but when you do, you’re glad it’s there.
A car insurance policy is an agreement between the driver and the car insurance company: the driver pays his or her premiums on time and the car insurance company offers financial protection should the vehicle be damaged or the occupants be injured by something included in their policy.
Components of a Standard Car Insurance Policy
The nuts and bolts of a standard car insurance policy are as follows:
- Collision: Covers damage to a vehicle caused by impact with another vehicle or object; this includes damage as a result of a rollover
- Comprehensive: Protects a vehicle that is stolen, vandalized or damaged by non-collision disasters such as weather damage
- Bodily injury liability: Offers financial protection in the event that you or another driver cause injuries to someone else; this coverage is required in most states
- Property damage liability: Offers financial protection in the event that you or another driver cause damage to property; this coverage is required in most states
- Uninsured/underinsured motorist: Pays for injuries and damage caused by a driver who has no car insurance (uninsured) or an inadequate amount to cover damages (underinsured). This also includes damage caused by a hit-and-run driver.
- Medical payments coverage: Offers coverage for medical, dental and funeral expenses for a vehicle’s occupants, regardless of fault
Each of these forms of coverage is priced separately, and coverage levels vary by policy. Not every form of coverage is required by law, and most drivers pick and choose which forms of coverage they require.
How Much Coverage is Required?
Each state requires drivers to purchase a certain amount of car insurance, but the minimum required amount varies by state. It is wise to purchase more than the state minimum, however. The state minimum will keep drivers in compliance with state law, but it may not provide adequate protection in the event of a major accident.
The Insurance Information Institute suggests drivers purchase a minimum of $100,000 of bodily injury protection and $300,000 of liability coverage per accident. However, you should speak with a licensed car insurance agent to determine exactly how much coverage is right for you.
What’s a Deductible?
A car insurance deductible is the portion the driver must pay out-of-pocket when filing a claim. For example, a driver with a $250 deductible must pay that amount should he or she choose to file a car insurance claim. Deductibles apply regardless of who is at fault for the accident.
Drivers can choose a deductible amount—usually between $250 and $1,000. Opting for a low deductible may be tempting, but a higher deductible will translate into a lower premium.
What Are the Parts That Make Up My Car Insurance Policy?
All car insurance policies are unique. Below you'll find the basic sections listed in most policies:
Car Insurance Policy Declarations
This part of your policy is unique to you; it contains the personal facts for drivers in your household such as name and address, make and model of your vehicle(s), vehicle identification number(s), policy number and policy duration. It also contains the basic type(s) of coverage you purchased and your policy limits and deductibles. Tip: Make sure your information is accurate; a claim may be denied if you provide inaccurate information to your insurer.
Car Insurance Policy Coverage Parts/Insuring Agreement
This section outlines your coverage options and coverage limits, as well as what your insurance company promises to provide in return for your payment.
Car Insurance Policy Exclusions
The exclusions section details what is not covered in your policy. Combined with the section above, this ensures that you know exactly what will be covered when you make a claim. It also shows you some possible deficiencies that you might want to correct down the line.
Car Insurance Policy Conditions
This is where the legal responsibilities of both the insured and the insurer are listed, including premium payment obligations, steps to filing a claim, and procedures for resolving disagreements.
Car Insurance Policy Definitions
This section defines terms and outlines the rights of the policyholder and the insurance company. This section is often referred to as the "fine print."
Compare Car Insurance Policies and Save
Now that you understand the basics of car insurance policies, it's time to learn how to find cheap car insurance. And the easiest way to save on car insurance is to compare car insurance quotes with a service such as InsWeb. When you compare car insurance quotes
at InsWeb you'll have the opportunity to speak with licensed, experienced agents to make sure you have the right coverage. And because you're shopping around, you're sure to find a car insurance policy at the right price.