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How to read your auto insurance policy.

If you're not quite sure what coverages you have on your car insurance policy, you're not alone. Most people are really in tune with their auto insurance when they are either shopping for quotes or having to file a claim. Once you've purchased your policy, it's easy to forget exactly what you're paying for.

When it comes to insurance, nobody likes a surprise. That's why it's important to review your auto insurance coverage from time to time so you understand what's covered and what's not. This gives you the chance to make changes if you feel you don't have the right protection. It also prevents unpleasant surprises if you need to file a claim, and discover that you're not covered for something you thought you were.

Deciphering your auto insurance policy.

Your car insurance policy is a legal document that explains what coverages you have, what coverages are excluded and how much the coverages cost for each vehicle on the policy. Typically, you'll get your policy in the mail. The package may contain your proof of insurance cards and other items, but will most likely provide the following important information:

Policy declarations — This page tells you who is covered by the policy, what vehicles are covered, the period of time that the policy is in effect, your policy number, payment options and premium.

Coverages — Coverages explains what the specific insurance is for each vehicle on the policy, including the cost per coverage. Here you can see how much your limits are for liability, uninsured and underinsured motorist, collision, comprehensive, personal injury protection and more. You'll also find information on how much your deductibles are for each coverage, and if you have additional coverages such as rental car reimbursement and towing. You may also find information on what auto insurance discounts you are receiving and what rating information was used in determining costs.

Here's an example of how coverage information may be presented:


Coverage for Vehicle #1 — 1999 Toyota 4 Runner

COVERAGE LIMITS DEDUCTIBLE PREMIUM
Automobile Liability Insurance Not applicable $168.25
  • Bodily Injury
$100,000 each person
$300,000 each accident


  • Property Damage
$100,000 each accident
Uninsured Motorists Insurance $100,000 each person
$300,000 each accident
Not applicable $29.51
Underinsured Motorists Insurance $100,000 each person
$300,000 each accident
Not applicable $19.43
Auto Collision Insurance Actual Cash Value $500

$122.04

Auto Comprehensive Insurance Actual Cash Value $500

$94.65

Towing and Labor Costs Coverage $50 each disablement Not applicable $3.20
Rental Reimbursement Coverage Up to $20 per day for
maximum of 30 days
Not applicable $12.40

Total Premium Vehicle #1

$449.48

Discounts
Multiple Car          $93.66

Multiple Policy      $42.77

Antilock Brakes    $32.25

Rating Information
Good driver rate. This vehicle is driven over 7,500 miles per year, no unmarried driver under 25.


Exclusions — Exclusions explain what special limitations on coverage exist, or what conditions would cause the insurance company to eliminate coverage. For example, your personal auto policy may not provide coverage for bodily injury if you are using your vehicle for business, or if the accident occurred while you were participating in a criminal activity.

Endorsements — Endorsements are changes to your policy. These may be changes to coverages, or wording. Read endorsements carefully.

It's very important that you familiarize yourself with the coverages and exclusions on your policy. This is the one area of misunderstanding that could cause you the most grief if you need to file a claim. If you have question, make sure to ask your insurance agent or representative -- immediately.

Definitions — Definitions explain what specific words and terms -- usually boldfaced -- mean as relating to your policy.

Responsibilities/Conditions — This section explains the rules and responsibilities for both the insurance company and you. How you pay your premium, how you cancel a policy, how you report a loss, are all part of this section.

What to do in the event of a loss — Usually, your policy will have a list of things you need to do when you report a claim. It's good to be aware of this because you may not always have that information at the time of a loss.

Want to test more of your knowledge about your auto insurance policy? Check out this quick quiz from Wiser Drivers Wise Up.

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