Like most drivers, if you have a car, you probably have a car insurance policy. But how do you know exactly what car insurance covers? Understanding car insurance documents can take a little work, but Bankrate is here to help. Our insurance editorial team, which includes licensed insurance agents, reviewed the steps it takes to read and understand your policy so that you can be confident you know exactly what your coverage includes.

How to read and understand your auto insurance policy

Your auto insurance policy is spelled out in documents you will have received from your insurer when you purchased your coverage. Knowing how to read car insurance documents is a skill that all drivers should have so they know exactly what their policy covers, as well as any limits on that coverage. Although your policy may include numerous pages of information, it is vital that you have a general understanding of its contents.

Fortunately, there are several parts to a policy, including a section called a declarations page that summarizes the contents of your contract with your insurer. Let’s take a closer look at this page and the rest of your policy to give you an overview of what it all contains.

What are the parts of a car insurance policy?

Your policy documents will vary somewhat depending on the company from which you bought your policy but will contain most or all of the following elements:

  • Declarations page: Usually the first page of your policy documents, it summarizes your coverages, limits of liability, premiums and deductibles.
  • Insurance agreement: Outlines exactly what you and your insurer have agreed to regarding coverage, including terms, conditions and exclusions.
  • Definitions: defines any key terms used in the policy.
  • Coverage sections: May go into more detail about the specific types of coverage you’ve purchased, including liability, collision, comprehensive and more.
  • Exclusions: lists any situations or circumstances not covered by your policy.
  • Endorsements: Outlines any optional endorsements you’ve added to your policy.
  • Cancellation terms: Explains the conditions under which your policy can be canceled, either by you or by the carrier.
  • Contact information: Provides contact information for your agent and the insurance company for claims, assistance or other purposes.

Different types of car insurance

Car insurance is broken down into several categories. Some of these types of coverage are likely to be mandatory, depending on your state of residence, while others may be optional but available to provide you with more robust coverage at an additional cost.

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, including hit-and-runs, 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 damage to your vehicle if the damage is caused by colliding with something, like another vehicle or stationary object, rollovers and potholes
Comprehensive Optional but may be required by a lender Also called “other-than-collision coverage,” this pays for things like a cracked windshield, theft of the car, vandalism, fire damage, hitting an animal and weather-related losses

Understanding your car insurance liability limits

Almost every state in the U.S. requires you to have liability coverage. This essential coverage pays for injuries or damage sustained by the other driver, their vehicle or stationary objects in an accident where you are found to be at fault.

Each state sets a minimum limit for its liability coverage. Let’s say, for example, that you live in New York. Liability limits are often written as 25/50/10. This translates into the following:

  • $25,000 bodily injury liability per person per accident
  • $50,000 bodily injury liability total per accident (i.e., if more than one person is injured)
  • $10,000 property damage liability

To drive legally in N.Y., you need at least this amount of coverage. However, many insurance experts recommend you purchase more than the minimum since a serious accident can cause injuries or damage that cost significantly more than the minimum. If you have minimum coverage, and an accident has a higher financial cost than your coverage affords you, you will need to pay the overage out of pocket.

What is a car insurance declarations page?

A car insurance declarations 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, 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 contact 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.
  • 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 and deductible (if applicable) for that coverage. You may also see a premium next to each coverage, showing how much that specific selection costs.
  • Endorsements: This section includes details about any endorsements added to the policy, such as roadside assistance, rental car reimbursement and accident forgiveness.
  • Premium: Your declarations page provides premium by coverage type and by vehicle.
  • 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 contact information 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 to purchase 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 cancellation or non-renewal and has limits on when and how it can cancel your car insurance policy based on state regulations. 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.
      • Cost: You usually get a higher level of coverage when you pay more for your policy. The average cost for a minimum coverage policy in the U.S. is $741; full coverage, which also includes collision and comprehensive insurance, averages $2,545. You are also likely to pay more if you increase the liability limits on your insurance. To ensure you have the most robust coverage you can afford, look for other ways to save money on your insurance, such as increasing your deductible or taking advantage of discounts.

      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 of 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. Some states also allow for digital ID cards that you can access via your insurance company’s mobile app. 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.