How to read your car insurance policy

Neil Bartlett

Yes, it can be a pain to read your car insurance policy, right up there with getting a tooth pulled. But it’s important to know what it says -- especially before you need to file a claim.

Insurance expert Jack Taylor, a professor of retailing at Birmingham-Southern College, says consumers are supposed to read their policies. While it's not mandated, you're expected to be able to understand what your car insurance policy says.

"It is important to read any policy issued to you as soon as you receive it,” the Wisconsin Office of the Commissioner of Insurance says.

While this article is not a substitute for spending some time reviewing the details of your car insurance policy, here are some basics, as well a couple of suggestions about how to be a smart car insurance consumer.

Parts of a car insurance policy

Depending on the insurance company, a standard car insurance policy contains five to seven parts.

1. The declarations page lists who’s covered (the insured), the insuring company, the policy number, the policy period, a description of the insured vehicle, the risks covered, the policy limits (amount of insurance), the premium amount and any deductibles.

2. The definitions section spells out the terminology used in the policy.

3. The agreements portion summarizes the major promises of the insurance company and tells you what is covered.

4. The exclusions section describes perils, hazards or losses that are not covered by the policy, such as if your vehicle is used for business purposes or if another driver gets behind the wheel of your car.

5. The conditions portion details the provisions, rules of conduct, and duties and obligations required for coverage. If policy conditions are not met, the insurer can deny your car insurance claim.

6. Endorsements are forms attached to the policy that modify it in some way. Example: Adding a relative who lives with you to your policy.

7. Riders spell out the terms of any amendments to your policy.

Answering questions

If you have questions about your car insurance policy after you've looked it over, call your insurance agent or company. “Sometimes consumers might want a little hand-holding,” Taylor says.

The best time to ask questions is right after you've received your policy, rather than waiting until you've got to file a claim.

It’s a legal contract

Because a policy is a legal contract, the terms of your policy are literally and figuratively in black and white.

Taylor says: “If it’s covered under the policy, it’s covered. If it’s not, it’s not. If you think a certain item is covered in your policy, but it’s not, it’s not.” In other words, it really doesn't do any good to tell your insurance company: “Wait, I thought that was covered.”

Remember that when it comes to reading your insurance policy, knowledge is power. What you don’t know can hurt you.

Check with your state

If you're confused about your car insurance policy even after reading it and after discussing it with your insurer, you can turn to your state insurance regulator for help.

Each state has an insurance regulator, and each insurance regulator has a website. Taylor advises you to go to your state’s website and look under consumer information. There, you’ll find information and recommendations about car insurance coverage in your state. Each state varies in terms of what types of car insurance coverage are mandatory and optional.

To find your state insurance regulator's site, visit the National Association of Insurance Commissioners website.

Taylor says checking your state’s insurance website is an excellent use of time if you’re thinking of switching car insurance companies, if you know nothing or next to nothing about car insurance, or if you want more information about an insurance company.

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