Reading the policy
Most of a car policy is four decisions you already made without being asked.
Liability, collision, comprehensive, uninsured motorist. The names are unhelpful and the numbers next to them are doing most of the work. Here is what each one actually covers, in the order it matters.
The four lines, plainly
- LiabilityRequired almost everywhere
- Pays for the damage and injuries you cause to other people. It does nothing for your own car. It is written as three numbers — per person, per accident, and for property — and state minimums are frequently lower than the cost of a single serious claim.
- CollisionOptional unless financed
- Pays to repair or replace your own car after an impact, whoever was at fault, minus your deductible. On an older car the payout is capped by what the car is worth, which is the calculation worth doing before you keep paying for it.
- ComprehensiveOptional unless financed
- Covers the things that are not collisions: theft, fire, hail, flood, a stone through the windscreen, a deer. Usually cheaper than collision, and the one people forget they have when a rock cracks the glass.
- Uninsured motoristVaries by state
- Covers you when the driver at fault has no insurance, or nowhere near enough of it. It is the line that quietly matters most, because whether you need it is entirely outside your control.
Three things that are commonly misread
01
A deductible is a decision, not a fee
It is what you pay before cover starts. Raising it lowers your premium, which is only a saving if the higher number is one you could actually produce the week something happens.
02
Full coverage is not a product
No insurer sells a thing called full coverage. It is shorthand, usually meaning liability plus collision plus comprehensive, and it says nothing about whether the limits are adequate.
03
Actual cash value is not replacement cost
Most policies pay what your car was worth the moment before the loss, depreciation included. That is often well short of what the same car costs to buy again.
Where to look first
Your declarations page is the summary — one or two pages, near the front of the documents. It lists every driver, every vehicle, every coverage line and the limit on each. If something there is out of date, everything built on top of it is out of date too.
Read it once a year, and again after anything changes: a move, a new job with a different commute, a driver joining or leaving the household, a car paid off. Those are the four events that most often leave a policy describing a life you are no longer living.
Questions about anything here are welcome — we do not sell policies and have nothing to quote you.
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