How to Read Your Car Insurance Policy

If you’re used to having your parents handle all of your personal finances and have just moved out on your own post-graduation, you may be a bit overwhelmed by all of your newfound responsibilities. One area that may give you pride—albeit a bit of a headache—is managing your car insurance. While making financial decisions for yourself likely means that you can now choose your own auto insurance policy instead of opting to use whatever provider your parents do, that also puts the onus on you to understand how your car insurance policy works.

Of course, nobody wants to wind up in a car accident, but if your family members have largely been responsible for managing your collision coverage and insurance policy since you learned to drive, there is a bit of a learning curve involved with taking responsibility for your insurance coverage. That’s because up until now, words such as “deductible,” “personal injury protection,” and “injury liability” likely haven’t meant much to you. Although you may first be put off by having to learn some new vocabulary, once you fully understand how each concept factors into your overall 

There are a few reasons that it’s important to understand your car insurance policy now and not later. For starters, if you realize after reading this article that there’s another type of coverage that makes more sense for you, you can get that taken care of as soon as possible. It’s also much harder (and much more stressful) to be learning about what your car insurance company does and doesn’t cover when you’ve been involved in an accident. Plus, you might realize that different types of coverage offer other kinds of perks, too, such as rental cars if you’ve been involved in an accident or even roadside assistance and towing.

Finally, if you plan to negotiate with an insurance agent as you’re comparing one insurer to another, it’s best to know your stuff. Whether you’ve been a policyholder for years or are getting motorist coverage for a brand new car, when you have a solid knowledge of the ins and outs of your policy, you’ll be able to get the right coverage limits and the best deal. Keep reading to learn how to read your car insurance policy, and for a quick review of the various terms and concepts that may apply to your insurance coverage.

Understanding the declarations page

The first aspect of your car insurance policy is known as the declarations page. The declarations page is the first page of your policy, too, so it’s hard to miss it! Sometimes your insurance agent will refer to this page as a “dec page,” so just know that “dec” is short for “declarations.”

The following information can be found on your declarations page:

Your personal info

The first information you’ll see on your declarations page is information about you, the policyholder. If you are not the policyholder, you’ll see their name and address on this page, but you’ll be listed as a family member on the policy, too. Any other individuals included on the policy will also be listed in the personal information section of the declarations page.

Your policy number

Another key component of your declarations page is the policy number. Your policy number is unique to your insurance policy and will be referenced any time you talk about your insurance with your insurer. Whether you’re filing a claim for vandalism or just need to ask a question in reference to your policy period, make sure to have your policy number handy before you email or call your auto insurance agent.

Your policy period

Your policy period refers to the dates that you are eligible for coverage and your insurance policy is effective. Keep in mind that this information is contingent on you staying up-to-date on paying your premiums. If payments have lapsed, this information may not actually be current.

NAIC code

The NAIC code—which is assigned by the National Association of Insurance Carriers, or NAIC—is something you hopefully never have to worry about. Each insurance carrier gets its own unique NAIC code as a form of identification in regulatory matters. If you ever feel like you need to file a claim against your insurance provider, in order to lodge your complaint with the NAIC for a transgression against their established best practices you’ll need to reference the NAIC code.

Information about your insurance agent

In addition to containing personal information about you and other members of your policy, your declarations page will also contain info about your insurance agent. You can expect to find their address and phone number, as well as their insurance agent number, on your declarations page.

Your covered vehicles

A key component of your declarations page, you can expect to find a listing of all of the vehicles your auto insurance policy covers as part of your insurance policy paperwork, too. In addition to a description of the make and model of your covered cars, you’ll also see details about their VIN (Vehicle Identification Number) and the state where they’ve been registered.

Your premium 

Beyond clerical details and information, your declarations page also has some information about the costs associated with your auto insurance policy. For example, you can find your premium rate on the declarations page, which explains how much you owe for your insurance coverage on a monthly, semi-annual, or annual basis. Your declarations page will explain how that premium is calculated, too, so it should always be your first place to look if you have any billing questions.

Your discounts 

You can also find information about any discounts that are currently being applied to your auto insurance policy on the declarations page. Whether you have a safe driving discount, a good grades discount, are bundling your auto insurance with homeowners’ insurance, or insure multiple vehicles through the same insurance provider, all of these discounts will be detailed on your dec.

Your driver rating

Some of your demographic information gets used as a way to categorize you in a certain segment of drivers and ultimately plays a role in how your premium is calculated. For example, it costs more money to insure a new, young, teenage driver than it does someone who has been driving for twenty years and has a history of zero accidents. 

Expect to see details about your age, gender, marital status, and how many years you’ve been driving in this section of your declarations page—as well as any accidents where you were at-fault or speeding tickets you may have received. Since this information plays a role in how your premium amount is calculated, it’s crucial that you double-check this information to ensure that it’s correct and accurate. Finding an error and getting it corrected could save you some money on your policy.

What to know about coverage, limits, and premiums

Beyond the information listed above, you can expect to find specific details about the ins and outs of your auto insurance policy on your declarations page. It’s critical to pay attention to this aspect of your policy, since not only do the types of coverage impact what sorts of claims you can make to your auto insurer, but they also provide the basis for the cost of your annual insurance premium.

Keep in mind that depending on the state you live in, some aspects of your auto insurance coverage are mandated by your local government, whereas other components are seen as optional coverage. Ultimately, it’s up to you how you mix and match different types of coverage, how you set your limits and deductibles, and what premium you pay for all of the coverage you’re receiving. Here’s a quick rundown of the types of additional coverage that may appear on your declarations page, and when they come in handy.

Collision coverage

This may be one of the phrases you can actually guess and be correct about when it comes to reading your car insurance policy! Your collision coverage is the part of your auto policy that kicks in any time your car is involved in an accident where it collides with another object. Whether you hit a car, light post, mailbox, or building, your collision coverage is responsible for the damages.

Comprehensive coverage

Comprehensive coverage covers most of the types of damages that are not covered by your collision coverage. Some of the most common claims that involve your comprehensive coverage include things like weather-related damages, vandalism, or theft.

Personal injury protection

Some auto insurers give you the option of adding personal injury protection, also known as PIP, to your policy. Personal injury protection helps to cover any medical expenses incurred by anyone in the vehicle who gets hurt in an auto accident. Basically, anyone who faces bodily injury in an accident, whether or not you’re the at-fault driver, can have PIP cover expenses associated with those injuries.

Underinsured/uninsured motorist property damage

When you get in an accident and aren’t at fault, or if you’re a party in a hit-and-run, underinsured, or uninsured motorist damage coverage can help cover for the other party without requiring your other insurance coverage to kick in. It’s worth noting that not every provider offers this form of an insurance policy; however, it can come in handy.

Liability coverage

There are a few different types of liability coverage you may be able to add to your policy. Keep in mind that liability coverage is only applicable when you are at fault, or liable, for the accident. Bodily injury liability coverage helps cover the medical costs of anyone injured in an accident you’re responsible for, including other parties. Property damage liability helps cover damages to others’ personal property when you’re at fault for an accident. 

Riders and other endorsements

In addition to the various types of coverage, you may see on your declarations page, there are a variety of other endorsements and riders that may appear as extra provisions on your auto insurance policy. For example, you may see extra expenses and perks like gap insurance, rental car reimbursement, or roadside assistance as features of your insurance policy, too. These are all extra items that are completely optional to include on your auto policy, so it makes sense to talk through the pros and cons of each of these features with your insurance agent before you commit to them one way or another.

Understanding the policy form

The policy form is another important aspect of your insurance policy. This is where the limits and exceptions of your auto insurance are clearly spelled out. That being said, because much of this information is written in “insurer lingo,” it can be a bit denser to get through than simply reading the details of your declarations page. Nonetheless, it’s important that you thoroughly review this information since it lets you know when you can and can’t use your insurance to file a claim.

The insurance agreement, a contract between you and your insurance agency, is part of the policy form as well. Remember that you must uphold your end of the contract—paying your premium on time when it’s due—in order for your insurer to uphold their end of the agreement.

If you have any questions after perusing the policy form, it’s a good idea to reach out to your insurance agent to make sure that you’re fully understanding the limits and exceptions to your auto policy. After all, the last thing you want to have to face is an accident where you think you’re covered only to find out that your coverage doesn’t actually apply to the situation the way you thought it would.

When should you review your car insurance?

While it’s not the most exciting task on the planet, reviewing your car insurance policy on a yearly basis can help you make sure that you’re getting the coverage you need each time you renew your policy. For example, you may realize that your driving habits have changed (as a lot of peoples’ have post-pandemic) and be willing to have a slightly higher deductible in order to lower your monthly premium since you’re on the road less. 

Another reason it makes sense to review your car insurance policy annually is that if the information doesn’t get updated you may realize that you’re overpaying for your premium based on outdated or incorrect information. Computer glitches and human errors do happen, so if you’ve aged out of a certain demographic but that isn’t reflected on your declarations page, it behooves you to get that error corrected as soon as possible.

There are a few different life events that may also warrant taking a look at your car insurance policy to make sure everything is accurate and accounted for, too. For example, if you’ve just gotten married or are adding a newly-licensed driver to your auto insurance policy, that’s an ideal time to review your policy. Additionally, you’ll want to update your policy when you move, if your commute changes substantially when you purchase a new car, and if you sell your old vehicle. Taking action as close to these events as possible can help you keep your auto insurance policy up-to-date, ultimately ensuring that you don’t run into any snags when you need to use your policy.

Bottom line

It can be tedious—and even downright boring—to go through several pages of legalese and high concept language about your automotive insurance, but it’s important to do so. Understanding your auto insurance policy ensures that you’re getting the best value from your auto insurance possible and that you aren’t paying for extraneous add-ons that aren’t really necessary based on your day-to-day driving habits.

When you review your car insurance policy, you should do so at least once a year or in the case of a major life event like a marriage, move, or the purchase of a new car. Even if you haven’t had anything major happen in the past year, taking a quick glance at your declarations page and policy form can help you identify any errors that could be negatively affecting your premium. There are a variety of different demographic factors that are used to calculate your premium, and if any of those are incorrect or outdated, you may be overpaying for your car insurance.

Beyond helping you save money, reviewing your car insurance can ensure that you have adequate coverage for whatever life may throw your way. In some states, different coverage types and amounts are mandated by the government, but that doesn’t mean that there aren’t some additional forms of coverage that may make sense to add to your policy based on your driving habits. Having personal injury protection, underinsured motorist insurance, or even something more basic like rental car reimbursement all can be worthwhile based on your own unique circumstances. 

Once you have a better understanding of all of the components of your car insurance policy, you can have a more productive and informed conversation with your insurance agent to make sure your coverage is right for you. The result could save you money year over year, as well as if you ever need to file an auto insurance claim.


1. What are the basic components of a car insurance policy?

The basic components of a car insurance policy generally include liability coverage, uninsured motorist coverage, Medical Payments coverage, Comprehensive and Collision coverage, and rental car reimbursement.

2. Am I legally required to purchase car insurance?

Yes, most states require drivers to have at least liability insurance coverage in order to operate their vehicle. Check with your state’s requirements to be sure.

3. Is there an age requirement for car insurance?

Most car insurance companies require drivers to be at least 18 years old in order to purchase a policy.

4. What kind of information do I need to provide when purchasing car insurance?

Most car insurance companies will require information about the driver and the vehicle being insured. This will typically include things such as your name, address, date of birth, driver’s license number, vehicle registration information, and other information regarding the vehicle’s make, model, and year.

5. What does liability coverage cover?

Liability coverage helps to cover the costs of damages and injuries to another person that were caused by the insured driver.

6. Do all car insurance policies cover damage to my vehicle?

No. Comprehensive and Collision coverage will pay to repair damage to your vehicle caused by an accident, theft, fire, or other such event.

7. How long does it take to get a car insurance policy?

This can vary depending on the company, but generally it should take no more than a few days.

8. What is an uninsured motorist coverage?

Uninsured motorist coverage helps to pay for damages if you are involved in an accident with another driver who does not have car insurance.

9. Will my car insurance premium go up if I make a claim?

Generally speaking, yes. Your premium could go up if you make a claim. It is important to carefully read your car insurance policy in order to understand how making a claim could impact your premium.

10. Can I customize my car insurance policy?

Yes. Many car insurance companies allow customers to customize their policy by adding or removing coverage options to meet their individual needs. Be sure to read your policy carefully to understand the exact coverage you’re purchasing.


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