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Understanding your car insurance quote

When you’re fluent in reading an auto insurance quote, you’ll know exactly how much coverage you’ll get, and how much it’ll cost you.

If you drive, you already know that it’s usually a smart idea to have some kind of auto insurance to back you up in the event of some vehicular mishap – especially because it’s illegal to drive without insurance. It’s an even smarter idea to set an annual reminder to look for a new insurance policy and compare your options, since you could always stand to save more money.

So why do many motorists sputter and stall when looking for car insurance? Collision and comprehensive. Liability and PIP. Deductible and premium. And those three numbers at the top of the page -- just what do they mean?

Letting some of those complexities get in the way can deter you from finding the best and most affordable policy for your needs. But when you’re fluent in reading an auto insurance quote, you’ll know exactly how much coverage you’ll get, and how much it’ll cost you, taking the guesswork out of finding a better insurance package.

Before you get behind the wheel, here’s how to get behind the wheel of understanding your auto insurance quote:

What is an auto insurance quote?

A car insurance quote is the estimated amount your car insurance will cost and what goes into that amount. The quote factors in a number of variables:

  • How much coverage you’ll need
  • Personal characteristics about you, including driving history and age. See more below.
  • What components of car insurance you need, including option ones like collision and comprehensive insurance.
  • Your deductible

Once your policy is finalized, your quote becomes your premium, which you have to pay periodically to keep your policy in force.

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The declarations page

The main page of your insurance quote is the policy declarations page, or "deck." It’ll list, or declare, all the policy details you’ve been quoted. Somewhere at the top of the page, you may see a series of three numbers that look something like this:

"50/150/35"

This trio of numbers summarizes the total dollar amounts (expressed in thousands) of coverage in your policy in the event of a car accident with damage or injuries:

  • "50" is for $50,000 of bodily injury maximum coverage for each person who may be injured
  • "150" is $150,000 of bodily injury maximum coverage for all injuries of people involved
  • "35" is for $35,000 of the maximum property damage you caused with your car (As we’ll define further down, this is called your liability coverage.)

These are the total primary coverage limit amounts you’d be covered for. So, if you were involved in an accident and you were injured as the sole occupant of the vehicle, your insurance company would pay out up to $50,000 to cover your medical expenses.

Keep in mind that every state that requires you to have car insurance also requires you to have a minimum amount of coverage in those areas. You can raise or lower the amount of coverage you purchase in each area based on your own coverage needs, but you’ll always need at least the state minimum.

Elsewhere on the deck page you’ll find other basic details, like:

  • Your name and address
  • The vehicle(s) you’re insuring, along with their VIN numbers, location, and if there’s a primary lien holder (if the car is currently being financed)
  • Additional (or excluded) drivers on the policy, and how many miles you and your additional insured drivers may average annually
  • Any discounts applied to the policy
  • Deductibles, if applicable

Car insurance terms

Some terms may look familiar, some may not, but understanding all of them will clarify your quote:

  • Actual cash value (ACV): When a car is totaled in an accident, the insurance company will pay out the policyholder the appraised market value of the vehicle. You may be able to purchase a replacement cost value (RCV) policy that reimburses you for the cost of the vehicle when bought new, but those types of policies are more expensive.
  • At fault: An at-fault accident is one that you cause, so your insurance will be responsible for paying damages to the other parties involved, after you meet your deductible limit. At-fault insurance has a counterpart in no-fault insurance, in which each party’s own insurance pays them for a claim regardless of who was at fault.
  • Claim: A bid/request made to your insurer to pay for expenses related to damages that qualify under your policy (also known as a "covered" incident), like car repairs or medical expenses; to determine what will be covered, your provider may dispatch a claims adjuster to investigate your claim.
  • Deductible: Like other types of insurance, your deductible is the amount of money you’re required to pay before your insurance takes over; if an accident results in $1,000 in damages, and you have a $500 deductible, you’ll need to pay $500 out of pocket before your insurer pays the remaining $500. As with other types of insurance, higher deductibles mean lower premiums, and vice versa.
  • Limit: It’s the maximum amount your insurer is willing to pay after you’ve reached your deductible. Once that limit has been reached, the policyholder would be responsible for any further expenses.
  • Premium: The amount you pay to have insurance coverage. Your premium costs may be monthly, bi-annually, or annually, depending on the insurer.

The components of auto coverage

You have the option to purchase as much insurance in each of the various components of car insurance coverage. Although there are state minimums for some areas of coverage, like liability and personal injury protection, other components are entirely optional. Knowing how much coverage you need in each type can save you money both in the premiums you pay for a given amount of coverage and when you’re in a car accident and liable for damages.

Liability

Liability insurance is the coverage that pays for damages and injuries that you cause in an accident. Denoted as the set of three numbers on your declarations page we listed above, liability can pay for motorist medical expenses, loss of earnings, vehicular damage, legal fees, and even funeral expenses. Minimum coverage requirements vary from state to state.

Collision

Collision coverage pays to fix your car if you’re involved in a crash with another vehicle or object where no other parties are involved. (Yes, even self-inflicted accidents are covered under auto insurance.) Collision deductibles range on average from $250 to $1,000.

Comprehensive

Comprehensive coverage doesn’t pay for collision- or accident-related damages. But it will pay for damages caused by weather, fire, flooding, natural disasters, theft, or coming into contact with an animal crossing the road.

Full coverage

There’s technically no such thing as "full coverage" auto insurance, but it’s a term that used to refer to policies that include a mix of collision and comprehensive coverages. Since it’s a bit more inclusive of coverage, you may expect your rates to be higher than what it might cost to buy each coverage separately. In Ohio, for example, full coverage auto insurance raises rates by $362 per year on average, and in New Jersey, full coverage increases rates by $606.

GAP insurance

Guaranteed auto protection (GAP) insurance a sort of auxiliary protection to collision coverage that covers the difference – the “gap” – between the amount you still owe on your car payments and the actual value of the car if it’s totaled in a crash or stolen. Check with your auto lender to see if GAP coverage is already included as part of your loan terms.

Personal injury protection insurance

Personal injury protection, or PIP, insurance coverage pays for medical and injury treatment expenses for both you or your passengers no matter who was at fault in the incident.

Uninsured motorist

Not everyone on the road is insured; according to the Insurance Research Council, about one in eight people drive without auto insurance. Uninsured motorist coverage protects you against damages caused by another driver who has no insurance, or not enough insurance, to pay for your bodily injury or repairs to your vehicle.

Additionally, when shopping for car insurance, inquire how much it’ll cost to obtain roadside assistance or car rental coverage. Having both options on your policy can ensure that you won’t need to pay for your vehicle to be towed, or to rent a car while yours is in the shop (being paid for by your insurance carrier, no less).

Determining your car insurance rate

Several different factors go into determining your individual insurance rates:

  • Your age: Younger, less-experienced drivers pay more for car insurance, but around age 25 rates start to drop.
  • Your driving record: Safer drivers – those with fewer traffic violations, for example – naturally are offered better rates.
  • Your gender: Men may be charged a higher rate because they’re more likely to cause an accident.
  • The car you drive: Driving a lower-end car will be easier to insure because higher-end cars are more expensive to repair.
  • Where you live: Someone living in an area with less crime will pay lower rates than someone living in an area where the car is more likely to be stolen or vandalized.
  • Your insurance company: Different companies may be more lenient to different information about you. That’s why it’s best to shop around for the best rates. Policygenius can help you explore your options and find coverage that’s not only affordable but fits all your needs.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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