Car insurance is mandatory in most states, but do you know how to read an auto insurance policy? Knowing how to read a car insurance policy can be an important skill and can help you understand the coverage you’ve purchased. Bankrate’s insurance editorial team includes licensed agents who are intimately familiar with car insurance documents. We can help you learn how to read a car insurance policy so that you can feel confident assessing your own coverage.

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How to read and understand your auto insurance policy

A car insurance policy is more than just the coverage types and limits listed on your ID card. The ID card proves you have current coverage in place, but it lacks critical details. The key information on what is covered or excluded in your auto insurance policy is found on the declarations page and the policy form, also known as a policy jacket.

The declaration page of your auto policy includes a summary of the vehicles insured, drivers listed, specific coverage types, limits of liability, deductibles, premium paid and discounts. The policy jacket provides more comprehensive details about your coverages, including exclusions and conditions of your policy. When you’re learning how to read insurance coverage, you’ll want to look at all the parts of your policy.

What are the parts of a car insurance policy?

Car insurance policies are made up of various coverage types. Some coverage types are commonly required by states, some are sometimes required and some are always optional (like roadside assistance and car rental coverage). Optional coverage selections, also called endorsements, will vary by company, but the core coverage types on an auto insurance policy are:

Coverage When it’s required What it covers
Liability Required in most states Includes bodily injury and property damage liability. Provides financial protection to pay for the other party’s injuries and damages when you cause an accident
Medical payments May be required by state Provides coverage for medical and hospital expenses if you or your passengers are injured in an accident
Personal injury protection (PIP) Required in no-fault states Similar to medical payments coverage but can also pay for lost wages and the cost of some household expenses you can’t perform after an injury
Uninsured and underinsured motorist May be required by state Covers your injuries (and sometimes your property damage) if you are hit by someone who doesn’t have insurance or doesn’t have enough insurance to pay for your losses
Collision Optional but may be required by a lender Pays for the damages to your vehicle if damage is caused by colliding with something, like another vehicle or stationary object
Comprehensive Optional but may be required by a lender Also called “other-than-collision coverage,” this pays for things like broken glass, theft of the car, vandalism, hitting an animal and weather-related losses

What is a car insurance declarations page?

A car insurance declaration page contains a simplified version of your policy information. This includes:

  • Policy number: This is a unique number assigned to your car insurance policy. This helps your company find your exact policy when you make changes or file a claim.
  • Policy term: The policy term is the length of time your policy is valid for, which is usually six or 12 months. On the auto declarations page, the term is listed with the start and end date, which is when the policy expires.
  • Company and agency information: Your declarations page will likely include your company’s name and logo and may include contact information as well. If you purchased your policy through a local agency, their information could also be listed.
  • Personal information: This includes the name of the policy owner or owners and the names of all the drivers listed on the policy. Dates of birth and drivers license numbers may also be included.
  • Vehicle information: The year, make and model of each insured vehicle, as well as each vehicle identification number (VIN), will likely be listed on a declarations page.
  • Coverage types and limits: You’ll see a breakdown of each coverage type you have on each vehicle, as well as the limit or deductible for that coverage. You may also see a premium next to each coverage, showing how much that specific selection costs.
  • Premium: Your declarations page should also show your total premium, and it might break down the cost by vehicle as well.
  • Discounts: Some declarations pages show the discounts you have applied to your policy.
  • Financial institution information: If you have a loan or lease on your vehicle, you’ll likely see your financial institution’s name and possibly its street address on your declarations page.

Car insurance policy exclusions

An important feature of a car insurance policy is the exclusions list section. It’s important to understand what your policy covers and what it excludes so that you know what situations you may need additional coverage for. Car insurance policy exclusions can include:

  • Delivery or rideshare completed with your vehicle without having specific coverage in place
  • Catastrophic events, like nuclear attacks or acts of war
  • Racing events
  • Intentionally-caused bodily harm or property damage to others
  • Intentional damage to your own car
  • Normal wear and tear
  • Mechanical failure
  • Accidents caused while performing illegal activity
  • Police seizure
  • Personal property not permanently attached to the vehicle

An exclusion could also be for a specific driver, often called a named-driver exclusion. This could be someone in the household who has a bad driving record or has another reason to not be covered under the policy. If that excluded person drives the car, there is no coverage if they are involved in an accident, even if they are not at fault.

Key policy considerations

These key policy considerations should be kept in mind while reading your auto insurance policy. An insurance policy is a binding contract between you and the car insurance company. You agree to make payments in exchange for the coverage outlined on the policy. Although you can cancel your auto insurance at any time, the insurance company must notify you prior to cancelation or non-renewal and has limits on when and how it can cancel your car insurance policy. The following are a few aspects you should be mindful of when reading your auto insurance policy:

  • Insuring agreement: This is the agreement made between you and the insurance company that it will provide coverage in exchange for your premium payment. The specifics on what is and is not covered is also included here.
  • Conditions: The conditions outlined in the auto insurance policy are rules, obligations or provisions you agree to adhere to in order for coverage to be provided when you file a claim. This could be a time frame to file a claim by or the terms used to consider termination of the car insurance policy by the insurance company, like a failure to make payments in a timely manner.
  • Limits: The limits outlined in the policy are the maximum per person or per claim amount the insurance company is obligated to pay. For example, a bodily injury liability limit of 100/300 means at most, the insurance company will pay up to $100,000 per person and $300,000 per accident for bodily injury you cause in a covered accident.
  • Cost: The cost of your auto insurance is the amount of premium you agree to pay to the insurance company in exchange for the coverage outlined in your policy. Failure to pay this amount in total by the end of the policy term may result in the auto policy being terminated.

Frequently asked questions

    • To find the best car insurance company, you may want to shop around to gather several quotes from different companies. All car insurance companies have unique rating algorithms depending on the level of risk they’re willing to take on, which means that the cost for coverage will vary for each carrier. Additionally, different companies will offer different optional coverage types, discounts, and features like mobile apps and online portals. Figuring out what is important to you and then shopping around might help you find the best insurance company.
    • No. You should keep an ID card in your vehicle at all times, as you must be able to show proof of insurance if you are pulled over by the police or involved in an accident. A declarations page is also acceptable for this, but an ID card is usually easier to put into your glove compartment and has all the essential information you’d need if you have to show proof of coverage. There’s no need to keep your entire policy in your vehicle as long as you have at least an ID card available.
    • Yes. If you make changes to your existing car insurance policy, you should get an updated declarations page by mail, email or in an online service portal, depending on how you have your policy set up. The new declarations page will show the changes and reflect the new status of your policy. If you switch car insurance companies entirely, you’ll get an entirely new policy, including a new declarations page and ID card.
    • If you paid in advance for your brand new car insurance policy, you may be entitled to a refund. Most carriers will prorate the refund when you cancel a car insurance policy, which means you get any unused money back. But terms can vary by company and you might have to pay a cancellation fee, even if the policy is brand new. If you plan to cancel a brand new car insurance policy, it may be worth speaking directly with your agent or the company to determine the correct way to cancel and what your expected refund is.
    • You should review your coverage when the policy is up for renewal or after you’ve made any major changes that could impact your car insurance. At renewal, make sure your coverage choices are still accurate and you’re taking advantage of the discounts you’re eligible for. If you’ve bought a new car, paid your car off, your teen got their driver’s license or your elderly parent on your policy surrendered their license, for example, it’s a good idea to review your coverage to see if changes are warranted.