Learn about the nuts and bolts of a standard car insurance policy by reading this user-friendly guide.

Collision Coverage

This covers loss to your own vehicle caused by its collision with another vehicle or object. If you cause an accident, collision coverage will pay to repair your vehicle. This is generally the most expensive portion of a car insurance policy.

Collision coverage comes with a deductible. This is the amount you are required to pay before the insurer pays the remainder of each covered loss.

Comprehensive Coverage

Comprehensive coverage is designed to cover damage caused by a non-collision event, such as fire, theft, vandalism, weather damage, etc. This coverage comes with a deductible.

Liability

Liability coverage, which is required by law in most states, is the basic building block of any car insurance policy. If you are at-fault in an accident, liability insurance will cover injuries and property damage costs to others involved in the accident. This includes legal defense fees. Minimum liability limits vary by state.

Bodily injury coverage pays for things like medical costs and lost salary to others, while property damage pays for repairs to other people's property you damaged in the accident (other than your own car).

Car Insurance Policy Declarations

This part of your car insurance policy is unique. It contains personal information about drivers in your home, including:

Coverage Parts/Insuring Agreement

This portion of your policy outlines the coverage options and coverage limits that you purchased, including liability, medical, collision and comprehensive. In other words, this section describes, in detail, what your policy covers.

Exclusions

This section highlights what is not covered in your car insurance policy. It also highlights coverage deficiencies that you may want to address in the future.

Conditions

This section outlines the legal responsibilities of both the consumer (you, the driver) and the insurance company. For instance, it details when premium payments should be made, a step-by-step process to file a claim, standard procedure for resolving legal disputes, etc.

Definitions

This section of the car insurance policy defines industry-specific terms and outlines the rights of both the policyholder and the insurance company. This section is often referred to as the "fine print."

Now that you understand your car insurance policy a bit better, why not shop around and see if you can find more affordable coverage?

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