Learn how to read your auto insurance policy so you know where you're protect in the event of a car accident.
Once you’ve bought car insurance you’re not quite done yet. You still need to review the paperwork to make sure your insurance company got everything down right — and that you understand what you’ve just bought, and your responsibilities going forward.
Your car insurance policy consists of a declarations page, an insuring agreement, policy conditions, and the types and amounts of coverage (liability, personal injury protection, collision coverage, comprehensive coverage, uninsured/underinsured motorists coverage, glass coverage, and gap insurance). All of that information can be daunting, but it’s important in understanding where you’re protected and where you’re still at risk.
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Car insurance policies generally contain three parts:
The declarations page includes all the most pertinent information:
Each type of coverage listed on your declarations page will have a corresponding insuring agreement. The insuring agreement explains what each coverage type covers, reiterates your coverage limits and deductible, and details exclusions.
This section will explain your legal responsibilities, including paying your premiums on time, and also detail how to file a claim, including how quickly you need to file.
Liability coverage: There are two types: bodily injury liability (BI), which covers medical bills for people you hurt in an accident, and property damage liability (PD), which covers damage to another party’s car or personal property in event of an accident. Liability coverage is the type of coverage that is mandated by most states. Find out your state’s car insurance coverage requirements.
Personal injury protection (PIP): Covers medical expenses for you or your passengers no matter who is at fault.
Collision coverage: Covers damages to your car from an accident or collision when you’re at fault.
Comprehensive coverage: Covers damage to your car not caused by a collision, such as fire, theft, smashed windows, or slashed tires.
Uninsured/underinsured motorists coverage: Covers medical and/or property expenses incurred if you’re hit by a driver who doesn’t have insurance or whose limits are lower than your costs.
Glass coverage: Some insurance companies include or offer supplemental no-deductible glass coverage.
Gap insurance: If you are still making car payments, gap insurance will pay the difference between the market value of the car and the balance you owe on the lien in case of a total loss or theft.
Once you’ve read over your car insurance policy, put it somewhere safe — like a home safe or file cabinet — and hopefully you won’t need to pull it out again.
Then, in case you do ever need to file a claim, you’ll know exactly where it is so you can review claim instructions.
Some people keep a copy of their policy in their cars, but law enforcement officers strongly recommend against it, since the personal information on it could be used by thieves. Plus, it’s unnecessary: while you do need proof of insurance in your car, your insurance card will suffice — no need to keep your car insurance policy in your glove box.
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.