0 How to Read Your Car Policy

One of the largest exposures of financial risk for the average person occurs once they get behind the wheel of their automobile.  Once you pull out on the road, there are millions of drivers out there; some of them may not have the best of training.  You may be the best driver in the world, but it's not you that you need to worry about; it's the teenage texting her boyfriend about their breakup last night, or the woman who didn't have time to put on her makeup this morning because she is running late, or the late night party-goer who had maybe a few too many.  No matter how careful you may be, there is always the potential of an accident.  Let's take a look at your typical auto policy and see how to read what it will do for you before the time comes.

First get your policy out and look to the page marked "Declarations".  This gives a synopsis of the coverages in your policy.  The first thing to look at is the make, model, and year of the vehicles listed to make sure they are correct.  Sometimes insurance companies omit listing one of your cars, or fail to change vehicles on the policy when you buy or trade for a new one. Rule of thumb is: if it's not listed, it's not covered!

Secondly, look to the liability limits listed on the declarations page.  It will either have a single number, like $100,000 combined limit, or 50,000/$100,000 limits.  This tells you how much coverage your policy provides in the event you are sued for an accident.  The liability coverage is not one of the higher priced items on the policy, so it's better to have more than less.

Next, if you have purchased comprehensive and collision coverage for your car, look to the deductibles listed.  Both coverages pay for repairs to your vehicle in the event of loss, but for different reasons.  An easy way to tell the two apart is that the collision pays as the result of a collision; car hits a car, car hits a tree, etc.  Comprehensive pays for everything else, and is sometimes listed as "Other than collision".  The deductible is the portion you pay first to have repairs done to your car.  For example, if the repairs are $2000 and the deductible is $500, the insurance company will pay $1500.

The next coverage to look at is uninsured motorist coverage, which compensates you in the event the other person in the accident is at fault and does not have insurance.  And yes, it happens a lot more than you would think.

Medical payments coverage pays for medical expenses to you, your family, or others in your car in the event of an accident.

Lastly you have the ancillary coverages like towing and rental car reimbursement, which are self-explanatory.

Take the time to read your automobile insurance policy.  After an accident happens is no time for surprises.