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:
On deck with the deck page
The main page of your insurance quote is the "deck," or the declarations page. 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:
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 in your bodily injury maximum, covering all injuries of people involved
- "35" is the maximum property damage covered in the event of a vehicular mishap -- in this case, $35,000. (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.
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
What do some of these terms mean?
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.
- 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.
- 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.
- 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 (you) 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.
Remember that with insurance, including auto coverage, higher deductibles mean lower premiums, and vice versa.
The different types of auto coverages
If you take away anything from this guide, it will be understanding what type of insurance you need and how much you should have of each. Here’s an easy breakdown:
Liability insurance is the coverage that pays for damages and injuries that you may have caused -- or been liable for -- 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, even funeral expenses. Coverage amounts vary from state to state.
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, thankfully!) Collision deductibles range on average from $250 to $1,000.
The oxymoron of auto insurance, comprehensive coverage isn’t really all that comprehensive, since it doesn’t pay for collision- or accident-related damages. A comprehensive policy will pay for damages caused by weather, fire, flooding, natural disasters, theft, or coming into contact with drunken deer crossing the road in the middle of the night.
There’s technically no such 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 years on average, and in New Jersey, full coverage increases rates by $606.
GAP stands for "Guaranteed Auto Protection," a sort of auxiliary protection to collision coverage that covers the difference between the amount you still owe on your car payments and the actual value of the car if it’s totaled in a crash. Check with your auto lender to see if GAP coverage is already included as part of your loan terms.
Personal Injury Protection insurance coverage pays for medical and injury treatment expenses for both you or your passengers no matter who was at fault in the incident.
Not everyone on the road is insured; in fact, 12.6 percent of motorists, about one in eight people, drive without auto insurance, according to the Insurance Research Council. 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).
Covering your coverage
As much as myths persist that your auto insurance rates should match those of your neighbor’s, or that auto insurance prevents you from ever being at fault, several different factors actually do go into determining your individual insurance rates -- your age, your driving record, the car you drive, your insurance claims history, where you live, and your insurance company all play a role in factoring your premium costs.
There are other ways to save on auto insurance. Check in with your insurer from time to time to see if they can provide you with any loyalty or good driving record discounts; likewise, examine your current policy and consult your agent to go over your policy with you. You may discover that you prefer less PIP coverage and more comprehensive coverage, or that you’d like to delete full coverage and add a mix of collision and comprehensive, depending on the cost savings.
By taking all this into account, shopping for insurance not only becomes easier, but more important. Now that you’re aware of what to look for in a policy, you’ll have the incentive to always be on the lookout for better rates when they come along.
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