5 Steps to Understanding Your Auto Insurance

While everyone driving in North Carolina is required by state law to maintain a certain amount of auto insurance, it's been shown that many of these drivers are unaware of exactly what's required, what coverage is optional and what's contained in their personal auto insurance policies. You may find reading your policy confusing and boring and it may come as no surprise that many drivers never get around to reading their policies at all. Without knowledge of what your insurance policy covers, however, you'll be unaware of the protection you have if involved in an accident or other type of vehicle incident such as theft or vandalism. The best advice is to read your coverage through and, if anything seems unclear, to consult with your insurance agent for clarification.

What's in a Policy

Insurance policies are legal contracts that bind the insurer to perform certain actions under particular circumstances in exchange for an agreed upon amount of money (premium). Since the insurance company wants the terms of the contract to be as specific as possible it will be extremely detailed and will typically contain legal language that may seem confusing.
Auto insurance policies typically contain five sections:

1. Declarations
2. Coverage parts and insuring agreement
3. Exclusions
4. Conditions
5. Definitions

While these parts may have slightly different names from one insurer to the next, each section covers the same basic points.

Declarations

This section contains information unique to you, such as names and addresses of drivers in your household, the make, models and VINs of the insured vehicle(s), policy number and duration, coverage type and level, policy limits and deductible amount. This is probably the most important part of the policy and you must make sure it's accurate, otherwise a claim you make down the road may be denied.

Coverage Parts and Insuring Agreement

This section outlines what your insurer promises to provide in exchange for your premium payment. It outlines the coverage options you've chosen and your coverage limits.

Exclusions

This section details what's not covered by showing your policy limitations.

Conditions

This section sets out the legal responsibilities of both you and your insurer. It lists premium payment requirements, claim filing steps and disagreement-resolution steps.

Definitions

This policy part defines terms and outlines policyholder's and insurer's rights. It's what many call "the fine print."
Understanding your coverage will preclude any surprises if you make a claim and it gets denied.