How to Read and Understand Your Auto Insurance Policy

young woman in living room with laptop reading her car insurance policy

Your car insurance policy is one of the most important pieces of paperwork in your life. Unfortunately, many drivers can barely make heads or tails out of their policy.

That’s where we come in. We’ve put together a comprehensive guide to help you read and understand your auto insurance policy. It will help you navigate your existing policy and determine if you need a different policy.

Ready to finally understand your car insurance policy? Keep reading to discover the answers you need!

Your Declarations Page

One of the first pages of your policy is the declarations page. This is where you can find several key details about your policy.

Some of the important information includes who the named insured person is on the policy and your contact info and a description of the insured vehicle(s). In this section, you can also review what your policy period is, what your liability limits are, and what your premium and ratings are.

If some of these terms are confusing, don’t worry: Our guide will break down everything you need to know!

Review the Policy Form

After the declaration is your policy form, it is best to review the policy form for accuracy and to answer lingering questions you may still have.

What does the policy form actually tell you? The best way to think of this section is that it is the form that defines your coverage. Along with that, you get important information about coverage exclusions, insurance riders, special endorsements, and other important information.

In some cases, sections about your policies and endorsements may have their own separate sections. In that case, the declarations page should help you navigate the different sections, and a good insurance agent can answer questions you may have after you review your policy form.

Special Terms to Understand on Your Auto Insurance Policy

What is it that makes an automobile insurance policy so hard to read? In most cases, it comes down to the different terms involved. In this section, we’re going to explain the meaning behind some of the most common terms in your policy.

Named insured

As the name implies, this defines who is insured by this policy. It is possible to add multiple people to your policy, and the first name listed will always be the primary named insured person.

Additional insured

If you have a current loan for a vehicle, then the lender is likely listed as a loss payee and may even appear as “additional insured.” And before you buy a car, many dealers will want to review the declarations page of your policy to make sure you have the minimum required insurance coverage for your state. For example, Alabama will have different minimum requirements than other states.

Drivers on the policy

This is a pretty straightforward term. As the name implies, this term defines all of the drivers who will also be insured by your policy.

Vehicles covered

This term tells us exactly which automobiles are covered by your policy. In addition to the make and model of your automobiles, this section will also contain the vehicle identification number (VIN) of all relevant vehicles.

Policy period

This one is easy to understand but crucial for you to memorize. This tells you exactly when your auto insurance policy started. More importantly, this section also tells you exactly when your policy will be over.


It contains some of the most critical information in your entire policy. This section gives the cash amount of your coverage and discusses what is actually covered by your policy. You can also find out about your premium in this section, though the priority for most drivers is verifying what is and is not covered by the policy.


This is an important section, and our guide will soon take a closer look at what these limits mean for you and your insurance policy. In short, this section defines the maximum amount that insurance will pay out in the event of bodily injury and property damage payouts.


This term lets you exactly how much you will need to pay before any of your insurance kicks in. It’s important to know this information before you are stuck with a surprisingly high bill after an accident!


This one is pretty straightforward, as it tells you how much you will pay for your insurance.

Applied discounts

This term lets you know about any discounts that are effectively lowering your insurance costs. It’s always good to speak with your insurance agent to discover any additional deals you can take advantage of.

Know the Limits of Your Auto Insurance Policy

 A man talking on the phone while reviewing an insurance policy

Earlier, we reviewed the importance of the “limits” section in your insurance policy. But this section may mean very little to you unless you know how to read it.

For example, you may see a confusing arrangement of numbers in this section with slashes between them. A typical amount may look like this: “30/60/25.”

What do these numbers mean? Respectively, these numbers refer to the limits of coverage for your bodily injury limit payout per person ($30,000 in this case), bodily injury limit payout per accident ($60,000 in this case), and the limit payout on property damage ($25,000 in this case).

Your state is going to offer minimums that define the minimum level of insurance coverage that is required. Beyond that, you can determine how much more coverage you want, though the limits of your coverage (along with other factors like your deductible amount) may drive the cost of your monthly insurance premium up.

Related Documents

As you can tell, much of the important information in your auto insurance policy is contained in the text of that policy. But your policy will also include some important documents you need to keep track of.

In addition to the policy form itself, you should have an insurance ID card. This includes details about your policy and your vehicle, making it easy for you to present this info in the event of an accident.

There will also be a verification of insurance page. This typically offers a one-page summary of things like who the named insured persons are, coverage limits, and other key info.

Perhaps the most important related document is your insurance agreement. This is your actual contract with the insurance carrier, though you will need to review other sections of the policy to understand everything on the agreement.

There will likely be a conditions page that specifies when you are required to file a claim and other steps that may be required (such as contacting the police if your vehicle was burglarized or vandalized). Beyond these conditions, it is up to you to determine when you file a claim, and some drivers are careful about filing because this typically drives the premium up.

What Are Exclusions?

Your insurance policy will also lay out what your insurance exclusions are. It is important to review this section because it will explain the exact circumstances in which your vehicle is not covered by insurance.

One typical (and obvious) exclusion is that insurance won’t pay out if you intentionally damage your vehicle or use your car to intentionally damage others. Additionally, your vehicle is typically not insured if you are using it for business purposes (such as a freelance delivery gig or delivering passengers as part of a rideshare program).

While you’re not likely to be driving Fast and the Furious style, exclusions typically specify that damage will not be covered if a car was used for street racing. And some exclusions verify that the carrier won’t pay out if your vehicle has been damaged by circumstances ranging from the outbreak of war to nuclear radiation exposure!

As you can tell, some of these exclusion events are likelier to happen than others. But make sure you understand everything so you know when damage to your car is effectively not covered by insurance.

Going Above the Minimum

Previously, we reviewed the concept of minimum insurance coverage. Your state will set the absolute minimum amount of insurance you must have as a driver. And if you’re trying to save a few bucks, you might be asking a question: Why would you ever go above the minimum level of coverage?

It’s almost always better to get more than the minimum amount of coverage because the insurance payout will help pay for damage to vehicles involved and even medical care for injured people. If you have minimum coverage and a newer vehicle, you may have to spend thousands of dollars out of pocket to replace your totaled car.

Plus, you never know how much medical care money you might really need. If you are at fault and another driver is hurt, a minimum amount of coverage may not be enough to take care of their medical bills. At that point, you may be on the hook for quite a bit of money!

Long story short? Buy as much insurance as you can reasonably afford and start driving with true peace of mind.

Finding Out More

Now you know how to read and understand your insurance policy. But do you know where to get the coverage you need when you need it the most? InsureOne is here to help! Start your free car insurance quote online, over the phone, or at one of our offices near you.