Demystifying Your Auto Insurance Policy: Know You’re Covered before a Crash

You don’t know when a car accident is going to happen. It’s a good idea to understand your insurance and know what is covered & what isn’t

​Demystifying Your Auto Insurance Policy: Know You’re Covered before a Crash

There’s nothing like the feeling you get when in an automobile accident. The screeching brakes, the held breath, the inevitable crash. And then, once the proverbial dust clears, the thought, “How much insurance coverage do I have?” Although no one expects you to have your auto insurance policy memorized, it’s a good idea to understand how an insurance policy works and to review yours every once in a while.

Why Insurance Policies Are Confusing or Misleading

Because car insurance policies are legal documents, they generally use legal terms that are often hard to understand. An insurance policy is a legal contract that binds your insurance company to take specific action under specific circumstances for an agreed upon amount of money. For this reason, the insurance company wants the contract to be as specific as possible. This means they are detailed and use a lot of legalese you may not be familiar with.

How to Read Your Insurance Policy

Although it can be tempting just to skim through your insurance documents, resist this course of action. By thoroughly understanding your policy, you can avoid expensive coverage gaps or frustration that can occur after an accident. This is why I recommend reviewing your insurance documents regularly, or reviewing with an auto accident attorney, so you know exactly what is covered and what you need in the case of an accident.

Begin with the Declarations Page

The first page of your policy, the declarations page is arguably the most important part of your insurance policy. It is usually clearly labeled as “declarations page” or “your policy declarations.” This page tells you which coverages you have chosen to have and the coverages you have decided not to. It also details coverage levels, deductibles, drivers on your policy, the price of each coverage, and the dates your policy is active.

Review after Renewals or Changes

Any time you renew your policy or make changes such as removing or adding a driver or car, or pay off your car, you should receive a new declarations page that details the changes to your policy. If you don’t get one within a week after any changes, contact your insurance company to confirm that your changes were made and request the revised declarations page.

Read the Insuring Agreement

Your policy should have an insuring agreement for each coverage type you elect. This is the actual binding contract that defines what is covered and how it is covered. Make sure you understand your coverage and review all exclusions. Exclusions can have a big impact on a claim. If any of your exclusions seem like a red flag, consider consulting an auto accident attorney to help you review them. Exclusions can act as gaps in your insurance in the case of an accident, leaving you responsible for any damages.

Mini-Glossary of Car Insurance Terms

Actual cash value (ACV) – The value of your car, based on the current cost to replace it minus depreciation.

Adjuster – A person who investigates and settles insurance claims.

Bodily injury (BI) – Physical injury to a person.

Cancellation – Termination of an insurance policy before the renewal date, either by the insured or the insurance company.

Claimant – The person making an insurance claim.

Declarations page – The first page (usually) of your policy showing the personal information of the insurer, the dates of coverage, vehicle description, premium amount, and what is covered.

Deductible – The amount paid by the insured before the insurance company has to begin paying.

Lapse – Termination or cancellation of a policy if premiums are not paid.

Policy period – The dates a policy is in force.

Premium – The amount the insured pays to the insurance company for their policy.

Why Coverage Matters

Without the right amount of coverage, you could be held responsible for damages to your car or another car when involved in an accident. That’s why choosing the right coverages and coverage levels are an important part of getting car insurance.

It’s important to have enough, not only so that your bills are covered, but to protect yourself from possibly getting sued. Florida minimum insurance requirements include $10,000 of no-fault or personal injury protection (PIP) insurance and $10,000 of property damage liability (PDL) insurance. It’s possible to get additional coverage if needed.

Here’s a quick list of the types of coverages and why they are important:

Liability: Pays legal settlements and medical bills that result from damages you or a designated driver on your policy have caused. This coverage will also protect drivers who are driving someone else’s car, with their permission.

Collision: Covers damage to your car caused by a collision with another car or an object, regardless of who is at fault.

Comprehensive: Pays for damage to your car due to theft, vandalism, fire, earthquake, flood, windstorms, hail, riot, or contact with animals.

Personal Injury Protection (PIP): Pays for the medical bills of the policyholder (and in some cases the passengers) injured during an auto accident, regardless of whose fault it is. This coverage may cover lost wages and funeral costs.

Uninsured/Underinsured Motorist Coverage: This coverage pays for damages caused when you, one of your family members, or a designated driver on your policy, are hit by an uninsured/underinsured driver. Not all states require this coverage. If your state does not require that you choose this coverage, your declarations page will note that you have elected to reject the coverage.

Get Help to Understand Your Policy Coverage

The car insurance world is filled with pitfalls, so understanding your policy can sometimes be tricky. Meeting the state requirement is one thing, ensuring that you have enough coverage to handle medical bills, the cost of a new car or a lawsuit is another. If you are wondering how to verify your insurance policy and coverages, take advantage of the free auto insurance consultation offered by Weinstein Legal. A quick call or email is all it takes to find out exactly what your insurance covers and what it doesn’t.

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