Understanding Your Car Insurance Policy

Learn the basics of your car insurance policy in this simple, easy-to-understand guide from the editors at InsWeb.

Find the right policy for your family—compare car insurance quotes online.

What Does Car Insurance Do?

Car insurance protects against financial loss in the event of a car accident, theft, or other unforeseen occurrence. It is a contract between you and your insurer—you agree to pay a set premium and your insurer agrees to provide insurance coverage up to specific limits. Most policies are for six-month terms.

Do I Have to Have a Car Insurance Policy?

All states require drivers to, at a minimum, provide proof of financial responsibility. (Meaning that you have to demonstrate that you have the financial resources you'll need if you are found to be liable in an accident.) Almost all states require this to be in the form of a car insurance policy that covers personal injury and property damage liability.

What Are My Car Insurance Coverage Options?

A basic car insurance policy will usually include several forms of coverage. Each type of coverage is priced separately and not every form of coverage is included in a standard policy. The basic forms of coverage are listed below, but keep in mind there are others not listed here and every state has different requirements.

• Bodily Injury Liability - A mandatory coverage that financially protects you from injuries you or a covered driver cause to someone else.
• Property Damage Liability - A mandatory coverage that financially protects you for damage you or a covered driver cause to someone else's property (such as another vehicle, telephone pole, fence, structure, etc.).
• Collision - This coverage pays for damage resulting from a collision with another vehicle or object (or damage caused by rollover).
• Comprehensive - This coverage protects you in the event of theft, vandalism or non-collision damage (including fire, earthquake, flood, etc.)
• Uninsured/Underinsured Motorist Coverage - This optional coverage will pay for injuries sustained by you, a member of your family, or a designated driver in the event an accident occurs with an uninsured or underinsured driver (or hit-and-run driver).
• Waiver of Collision Deductible - This coverage is available in certain states and only if you have Uninsured Motorist Coverage. The Waiver of Collision Deductible coverage will pay your Collision deductible if the damage to your vehicle is caused by an uninsured motorist.
• Medical Payments - Optional in most states. If you have an accident, it helps pay for medical, dental and funeral expenses for you or your passengers, regardless of who is at fault. In those states with no-fault coverage, Personal Injury Protection (called "PIP") covers the basic expenses incurred by the insured or his family in an automobile accident without regard to fault.

What's a Deductible?

A deductible is the amount of money you are required to pay before your car insurance will take effect. For example, if your car insurance deductible is $500 and you're involved in an accident in which you were legally determined to be "at fault," you will be personally responsible for the first $500 of any repairs made to your vehicle. Generally, the higher your deductible is, the lower your car insurance premium will be.

What Are the Parts That Make Up My Car Insurance Policy?

All car insurance policies are unique. Below you'll find the basic sections listed in most policies:

• Car Insurance Policy Declarations
  This part of your policy is unique to you; it contains the personal facts for drivers in your household such as name and address, make and model of your vehicle(s), vehicle identification number(s), policy number and policy duration. It also contains the basic type(s) of coverage you purchased and your policy limits and deductibles. Tip: Make sure your information is accurate; a claim may be denied if you provide inaccurate information to your insurer.
• Car Insurance Policy Coverage Parts/Insuring Agreement
  This section outlines your coverage options and coverage limits, as well as what your insurance company promises to provide in return for your payment.
• Car Insurance Policy Exclusions
  The exclusions section details what is not covered in your policy. Combined with the section above, this ensures that you know exactly what will be covered when you make a claim. It also shows you some possible deficiencies that you might want to correct down the line.
• Car Insurance Policy Conditions
  This is where the legal responsibilities of both the insured and the insurer are listed, including premium payment obligations, steps to filing a claim, and procedures for resolving disagreements.
• Car Insurance Policy Definitions
  This section defines terms and outlines the rights of the policyholder and the insurance company. This section is often referred to as the "fine print."

Compare Car Insurance Policies and Save

Now that you understand the basics of car insurance policies, it's time to learn how to find cheap car insurance. And the easiest way to save on car insurance is to compare car insurance quotes at InsWeb. When you compare car insurance quotes at InsWeb you'll have the opportunity to speak with licensed, experienced agents to make sure you have the right coverage. And because you're shopping around, you're sure to find a car insurance policy at the right price.