Why You Want to Review Your Car Insurance Policy

All U.S. drivers are required by law to carry vehicle insurance coverage. Most people only think about their policy if there’s been a change, or after an accident. But a careful upfront policy review can catch oversights or coverage gaps that could be costing you money.

Your policy is a contract between you and your insurance company. It provides you with exactly what the insurance company agrees to do in exchange for your premium. This contract is divided into two sections: a Declarations Page and the policy itself (the Insurance Agreement).

Declarations Page This page (or pages) contains information about your basic policy. It summarizes what coverages you have elected to maintain or decline. It’s unique to you, with details about your type of coverage, your dates of coverage and coverage levels, deductibles (the amount of money you have to pay toward repairs before your insurance covers the rest), all named drivers and the price you are paying for each coverage.

Your declaration page will also identify each vehicle you have insured by the VIN, year, make, model, and body type—as well as your specific policy number identifying your account. If you find any errors on your declarations, contact your agent immediately.

You can always reduce your insurance rates by raising your deductibles while still maintaining full coverage for your vehicle.

The Insuring Agreement This section outlines the coverage options and coverage limits that you purchased.

There are mandatory coverages you’ll need. State laws dictate the minimum amount of car insurance for liability that you must carry—to cover injuries and property damage costs caused to others if you are at fault. Your lender will also most likely require that you have comprehensive coverage (for damage to your vehicle caused by events like fire, theft, vandalism, and falling objects), and collision coverage (to pay for repairs to your car if you’ve caused the accident). Collision coverage can be expensive. Once again, choose a deductible amount that you can afford to pay, before the insurance company pays.

NOTE: Be careful not to drop the required auto insurance coverages from a financed vehicle. It is a violation of your loan contract and may put your loan in jeopardy. Also, the lender could place single interest coverage (force placed insurance) on the vehicle and add the premium to the loan. This type of coverage is expensive and does not provide any coverage for you, just the lender. If you’re not sure what coverage is required, check your loan documents or contact your lender.

The insuring agreement also lists any optional coverages you’ve selected—such as towing and labor, windshield damage, and coverage for rental reimbursement/transportation expenses.

Another way to save: Your carrier may offer a discount for bundling your auto insurance with other insurance products, or for being part of a select occupational group (doctors, RNs, dentists, teachers, police, firefighters, etc.), homeowners, good students, teens with parents who have safe driving records, cars with air bags, drivers who own two or more automobiles, and more. Check with your carrier to see if you qualify for these discounts.

When you take the time to thoroughly assess the protection offered by your current insurance policy, you may find gaps or discover you are underinsured. Like any business, insurance companies all have different rates, plus they can vary greatly in everything from their coverages, to their office hours, and the speed of their claims service. So, shopping around is essential to getting a good deal, and finding the proper coverage and service for you.

 

Resources: The Insurance Information Institute, The National Association of Insurance Commissioners