insure logo

Why you can trust

quality icon

Quality Verified

At, we are committed to providing the timely, accurate and expert information consumers need to make smart insurance decisions. All our content is written and reviewed by industry professionals and insurance experts. Our team carefully vets our rate data to ensure we only provide reliable and up-to-date insurance pricing. We follow the highest editorial standards. Our content is based solely on objective research and data gathering. We maintain strict editorial independence to ensure unbiased coverage of the insurance industry.

Auto insurance policies are filled with legal jargon that can make them confusing to understand. This is because a policy is a legal contract that binds the insurance company to perform specific actions under certain circumstances for an agreed-upon premium. Insurers want the contract to be as specific as possible, so policies are detailed and written in legalese.

Resist the temptation to gloss over your insurance, because understanding your insurance policy can help avoid costly coverage gaps or frustration with your insurer after an accident. As the saying goes: an ounce of prevention is worth a pound of cure.

To read and understand your auto insurance policy, start with the declarations page because this defines your coverage, insured drivers, vehicles, and more. Review the declarations page periodically to ensure accuracy. Ensure you understand key terms in the definitions section, which clarifies who and what is covered. Also be aware of exclusions that may restrict your coverage and impact claims. 

Key Takeaways

  • The declarations page tells what coverage you have on your policy and which you have declined.
  • You will find a definitions section and the details like who is insured, what is insured, and when it is insured, mentioned in your auto insurance policy.
  • When you change your policy, like adding or removing a car or driver, the company will send you a new declarations page.
  • If you find that you have gaps in your insurance or are underinsured, you should shop for more coverage.

Review the declarations page

The declarations page is arguably the most important page of your policy, but it shouldn’t be the only page you read.

“The declarations page ‘declares’ what coverages you have elected to have on your policy and which you have declined,” explains Carole Walker with the Rocky Mountain Insurance Information Association. “It also includes details about coverage levels, deductions, named drivers and the price you pay for each coverage.”

The declarations page should be the first page and clearly labeled as “your policy declarations” or “declarations page.”

With many car insurance companies, you don’t have to wait for a paper copy to arrive — you can log in and view your policy online.

The information included on the declarations page includes:

  • Personal information: Your policy number and personal information, such as your address.
  • Insured drivers: Names of all of the drivers insured under this policy.
  • Insured vehicles: The vehicles insured by this policy, including the VIN numbers.
  • Schedule of coverages: A listing of the coverages, limits, deductibles and the premium for each coverage. This should be broken out by vehicle if you have multiple vehicles on your policy. If a coverage is not listed in this section, you don’t have it.
  • Policy period: The dates the policy is in effect.
  • Discounts: Any discounts that have been applied to the policy.
  • Surcharges: If you’ve received a speeding ticket, or made a recent claim there will be a surcharge on your premium.

Sample declaration page
Click here to zoom in

Review after changes and renewals

When you make changes to your policy, such as adding or removing a car or driver, you should be sent a new declarations page that shows the alterations to your policy.

If you don’t receive a new one within a week after the change, call your insurance company:

  • Confirm the policy changes were made
  • Request that your carrier send you a new declarations page showing the changes

“It’s imperative that this page be reviewed at each renewal to ensure everything is accurate and the basic details have not changed,” warns Paul Dreher with Lawley Insurance in Buffalo, New York.

Choosing the right car insurance coverage levels and limits

Choosing the proper coverages and levels is one of the most important parts of car insurance. Without the proper coverage, you may be responsible for damages.

“It’s very important to have enough liability insurance, because if you’re involved in a serious accident, you may be sued,” advises Loretta Worters, vice president of communications with the Insurance Information Institute.

Here is a rundown of the various coverages and recommended levels:

  • Liability: This coverage pays medical bills, legal settlements, and repairs that are the result of injuries or damage that you or a designated driver cause to someone else’s person or property. It will also protect you when driving someone else’s car with their permission. This coverage is required in almost all states but required liability coverage levels vary by state. Liability insurance is divided into three amounts: per person limit for bodily injury, per incident limit for bodily injury, and a property damage limit. Using the recommended amounts of $100,000, $300,000 and $100,000, the limits are generally written as 100/300/100.
  • Collision: This coverage pays for any damage to your car resulting from a collision with another car or object, regardless of whether you are at fault. Deductibles generally range from $250 up to $1,000. Typically, a higher deductible means a lower premium.
  • Comprehensive: This insurance will pay for damage to your vehicle that is caused by theft or something other than a collision. Covered perils include fire, falling objects, explosions, earthquakes, windstorms, hail, floods, vandalism, riots, or contact with animals, such as deer. It also covers damaged windshields and other glass damage. Like collision coverage, you can choose your deductible amount. Your options normally range from $100 to $1,000. 
  • Medical Payments or Personal Injury Protection (PIP): This will pay for the medical treatment of the policyholder and any passengers in the vehicle that were injured during an auto accident, regardless of fault. PIP may cover lost wages and funeral costs. Requirements for this coverage vary by state.
  • Uninsured and Underinsured Motorist Coverage: This will pay for damages if you, a family member, or a designated driver are hit by a driver who is uninsured or underinsured. Requirements for this coverage vary by state. In states where the coverage must be offered but can be rejected, your declarations page should note “insured rejects” if you have waived the coverage.

Understanding confusing terms in your auto insurance policy

Because insurance policies are written in legal language, they can be confusing. All policies have a definitions section that defines specific words used in the policy.

“The ‘definitions’ section is extremely important as the terms contained there will define who is insured, what is insured, and when it is insured. You will need to refer back to the definition page often,” advises Kristofer Kirchen, with Advanced Insurance Managers.

Defined words will be bolded in the policy. Here are a few key terms:

  • Family member: Take note of what is considered a family member or insured driver.

“Ideally this should read ‘and or any insured’ which is a broad definition, not ‘the insured’ which is a much more narrow definition,” warns Amy Bach with United Policyholders. 

If your policy only notes “the insured” or “named insured” under the coverages section, you have a restrictive policy that does not extend coverages to those who are not specifically listed on the policy. This means your vehicle isn’t protected if a relative borrows your car and gets into an accident.

  • Covered autos: Some policies may not cover damage to “substitute vehicles,” including a loaner or rental car.
  • Actual cash value (ACV): Collision and comprehensive policies usually pay out the actual cash value, which means that the insurance company will determine the market value of the car at the time of loss. If the car is newer, this amount may be less than you owe on the vehicle, as new cars depreciate quickly. Gap insurance could prevent a large discrepancy in the amount you owe compared to the amount you receive.
  • After-market parts: These are parts made by a company other than the auto manufacturer. You can add an original equipment manufacturer (OEM) endorsement to your policy so only OEM parts are used to repair your vehicle – but you’ll pay more for this option. For example, if your classic car was damaged in an accident, the allotment for OEM parts would be used in the repairs. 

Keep an eye out for words and phrases such as “does not apply to,” “except,” “all,” and “however.” These words can proceed or follow coverage explanations and drastically change the meaning. 

If you discover words you don’t understand, check the definitions page or contact your insurer for clarification.

Read the insuring agreement

Car insurance policies will have an insuring agreement for each coverage type: liability, uninsured/underinsured, medical/PIP and collision and comprehensive.

“The insuring agreement is the actual binding contract that governs whether or not coverage is afforded in the event of a loss,” explains Kirchen. It defines what is covered and how it is covered.

Understand exclusions and limitations of your car insurance policy

Here are a couple of tips from Kirchen about reading your policy:

  • If the policy refers to another section when describing coverage, read the section immediately to ensure there are no exclusions.
  • Pay particular attention to the exclusions in each section and those that apply to the policy as a whole. Exclusions can have a major impact on a claim.

Items listed on your policy as an “exclusion” are not covered. Common exclusions include the following examples, with a note of what section of the policy they are considered:

  • Intentional damage to others, bodily injury or property damage (liability)
  • Property damage to your own property (liability)
  • Damages caused by your vehicle being used for livery purposes (liability)
  • Damages caused by using your vehicle for business purposes (liability)
  • Intentional damage to your own vehicle (collision and comprehensive)
  • Damage done to your vehicle by war, bio-chemical attack, nuclear exposure (collision and comprehensive)
  • Personal items that are not permanently installed in your insured vehicle (collision and comprehensive)
  • Any vehicle used for competing in any prearranged or organized racing or speed contest (liability, plus collision and comprehensive)

If you have a restrictive policy, there may be many more exclusions. For example, your policy may not pay out if you allow permissive drivers or extend coverage to rental vehicles.

Tips on reading your auto insurance policy from insurance experts

The world of car insurance is filled with pitfalls that can leave you unprotected. Here are a few things to be aware of when shopping for coverage:

Minimum coverage is not enough

Meeting the state requirement is one thing, but having enough coverage to cover the cost of a new car, medical bills or a lawsuit is another. In California, the minimum required property liability coverage is $5,000. In 2015, the average cost of a new car was around $33,000. If you were at fault for totaling the other driver’s brand-new vehicle, you’d be stuck paying the $28,000 out of pocket.

“A major mistake that many consumers make is opting for the minimum state-required coverage,” warns Worters. “The minimum coverage for bodily injury may be as low as $10,000 per person. In today’s litigious society, that is not enough.”

“You should carry enough liability to protect your assets in the event of an accident. It’s possible to get additional coverage with a Personal Umbrella or Personal Excess Liability policy,” advises Worters.

Double the coverage isn’t double the price.

Carrying more coverage than the state minimums is not as unaffordable as you think – especially compared to the $28,000 price tag of the accident in the example above.

“In many situations, the cost to dramatically increase your coverage can be less than $100 per year,” advises Dreher. 

In fact, the national average to increase liability coverages from state minimum to 50/100/50 is around $67. 

Your old car probably doesn’t need collision and comprehensive

If you have a vehicle that you would replace instead of repairing after an accident, consider dropping collision and comprehensive. Typically, if the car is over 10 years old, its value no longer makes the cost of coverage worth it. For example, if your car is worth $3,000 and your deductible is $500, your potential payoff is $2,500. If your annual comp and collision premiums surpass 10% of the payoff — in this case $250 — consider canceling the coverage to save for a newer car.

Be aware of your credit report and score

If you aren’t current on your credit report and credit score, there’s no time like now.

“Your credit score and personal data impact your premium now more than ever,” warns Bach. “It’s important to make sure your insurer is basing your premium on accurate information about you and your credit.”

Personal finance experts advise paying for your three FICO credit scores once a year. Keeping this information accurate and resolving any incorrect information or identity fraud helps to secure the best rates.

Assess your coverage needs every few years

Whether buying a new car or having a baby, your personal assets change over time and protecting them with insurance is critical. 

“It’s important to review coverage options and become educated about the importance of adequate limits to protect your assets and future earnings,” advises Dreher.

Consider these questions and talk to your insurance agent or a financial advisor to make sure you are fully protected:

  1. Have you acquired any assets that need protection since you established your policy, like purchasing a house or receiving an inheritance?
  2. Would your current insurance coverage protect you and your family in a major accident?
  3. Would your property damage liability cover the cost of a newer car if you damaged a person’s vehicle in an accident?

Insurance is complicated, so turning to an expert is a great idea if you have questions or trouble understanding your policy.

“Ultimately, the best advice is to speak with your agent in the event that you do not understand some of the verbiage or how the policy responds in a given circumstance. Be sure to do the reading and ask those questions before you have a loss,” says Kirchen.

Review your policy now

Take the time to honestly and realistically assess your assets and the protection offered by your current insurance policies.

If you find gaps or discover you are underinsured, it’s time to start shopping for new coverage. Even if you feel good about your coverage levels, shopping around may result in some savings. Insurers rate risk differently, so premium quotes can vary dramatically.

Frequently asked question

How do I read my insurance card?

Your auto insurance card provides a small glimpse into your policy – you might have a paper card you keep in your vehicle, or it might be downloaded to your smartphone. This card will usually display the name of the insured person — which is usually you — and the person’s address. It will likely have details on the insured vehicle, like its VIN. It will also provide your auto insurance policy number, the name of the insurance company and the company’s contact information. 

How do I know if my car insurance covers commercial use?

You will likely need commercial car insurance if you use your vehicle for business purposes outside of commuting, such as driving for a rideshare app. To determine if your policy covers commercial use, read the agreement or contact your insurance agent. Generally, personal policies exclude coverage for commercial activities and you likely need to buy a separate commercial auto policy. Don’t try to turn your vehicle into a business without knowing if you’re covered because you might not be protected. 

What key terms or clauses should I pay special attention to when reviewing my car insurance policy for the first time?

When shopping for car insurance and perusing a policy for the first time, put a special focus on coverage types, limits, and deductibles. You also want to have a clear idea about exclusions. Be aware of any endorsements that modify your policy and any coverage conditions. If you have any questions or changes, contact your insurer. 

author image
Mark Vallet
Contributing Researcher


Mark is a freelance journalist and analyst with over 15 years of experience covering the insurance industry.