Auto Insurance, Understanding your coverage.

autoIf you drive you need auto insurance coverage and if you have auto insurance once every six month or one year you receive a copy of your insurance policy.

The first few pages of that policy are what is known as your Declarations page.  The declarations page describes what is covered in the policy and what the limits of that coverage are.

Besides the basics like your name, address and policy number the Declarations page notes the coverage period or the time frame of the policy.  Most auto insurance policies will have a six month or one year policy coverage period.  The plan will start at 12:01 am the day the policy becomes effective and ends at 12:01 am on the last day of the coverage period.

The Declarations page will also list the drivers that are insured and the vehicles that are covered.   Most Declarations pages will also list any excluded drivers (drivers in the household that you choose not to insure) and any lien holders or additional insureds such as banks and credit unions that may hold title to the cars.

The Declarations page will also list the coverages and the limits of those coverage.  This is where it gets confusing.


Most auto insurance declarations pages will start the coverage list with Liability Coverage.

Liability Coverage provides financial protection for the insured driver who, while operating a vehicle, harms someone or their property.  Auto Insurance Liability only covers damages to a third party and/ or their property not the insured driver or their property.

Liability Types

There are several different types of Liability coverages in a standard auto insurance policy that are listed on the Declarations page.

Bodily Injury sometimes referred to as BI coverage provides financial protection if you are found to be legally responsible for a car accident that causes injury to a third party while driving an insured vehicle.  BI coverage will also provide legal defense coverage if you are sued for damages.

Property Damage liability coverage will pay for the cost of damages to someone else property after an accident that you are legally at fault for.  The most common type of property damage are damages to other cars but property damage will also cover damages to buildings and landscapes.

Uninsured Motorist Coverage is an optional liability coverage that would protect you in the event you are in an accident where the other driver is legally responsible but has no insurance coverage.

It’s estimated that 1 in every 8 drivers on the road has no insurance coverage.  If you are injured in an accident or your car is damaged by an uninsured driver and you have Uninsured Motorist Liability coverage your costs will be covered by your policy.

Underinsured Motorist Coverage is also an optional coverage that will cover your costs in the event you are injured or your property is damaged by someone whose insurance liability coverage is too low to cover all your expense.

Medical Payments coverage is an optional coverage that will cover the medical expense for drivers or passengers who are injured in an accident regardless of fault.  Amounts of coverage average between $1000.00 and $5000.00 but some policies allow for higher amounts to be purchased.

Collision coverage is coverage for your car, if you’re involved in an accident with another car or object Collision coverage will pay to repair or replace your car.   Auto Insurance can be purchased as a “Liability Only” coverage, in other words it pays for damages and injuries caused by you to third parties.  Without Collision coverage, your policy will not pay to fix or replace your car.

Comprehensive coverage is like Collison coverage but it covers your vehicle in the event it is damaged by something other than another vehicle such as vandalism, storms or hail and other things out of your control.  Most policy will include Comprehensive coverage with Collison coverage.


On the Declarations page, usually next to or under the type of Liability coverage will be the listed limits of that type of liability coverage.  The liability limits define the maximum amount the insurance will pay for a listed claim.  Most policies pay per occurrence or accident and will have a limit paid per person and a total limit per accident or occurrence.

An example would be a policy with a $100,000/$300,000 bodily Injury limit will pay up to $100,000.00 per person injured in the accident or $300,000.00 total for all persons injured in an accident.

Liability limits can be purchased at different levels the lowest usually being $15,000/$30,000 to as high as $250,000/$500,000.

It’s important to know your liability limits and adjust them accordingly.  If you own a home or a good size estate it’s best to go with a higher liability limit to protect your assets.

Deductible is the amount of money you will pay before the insurance coverage starts paying.  Most auto insurance policies will offer different deductibles ranging from $100.00 to $1000.00 with some carriers going as high as $5000.00.   In most cases the deductible will be “waived” for any type of liability claim and will apply to mostly Collison and Comprehensive losses.

Towing and Labor also known as TL coverage is an optional coverage that can be purchased to cover transporting your car to a repair shop in the event your car is damaged or even breaks down.  Other items that can be coved by TL include:

  • Tire Change
  • Gas, oil and water delivery
  • Battery service
  • Lockout services

Extended Transportation coverage also known as rental car reimbursement covers the cost of a rental car or vehicle in the event your car is damaged in an accident.  Most policies require you to have Collison and Comprehensive insurance coverage to add Extended Transportation.

Different daily and maximum amounts can be purchased from $20.00 per day with a maximum of $600.00 total to $75.00 per day with a maximum of $2000.00 total.

GAP insurance coverage.  If like most of us you lease your car or finance your car you may want to consider GAP coverage.

If you are in an accident and your vehicle is damaged beyond repair GAP coverage will pay the difference between the fair market value of your vehicle paid by your insurance company and any difference you may still own.  Before considering GAP coverage please review your lease or finance agreement.  Many banks and lenders include GAP coverage in your agreement and it may not be necessary to purchase GAP coverage.

Mechanical Breakdown insurance coverage is an optional coverage that acts like an extended warranty.

Mechanical Breakdown insurance can help pay for several types of mechanical issues with your car and can be much more affordable than other standard extended warranties.  Not all Insurance carriers offer this coverage.

I highly recommend that you review your Auto Insurance policy limits, understand your coverage and never hesitate to ask your agent or insurance company representatives questions or for explanations as to what’s covered and what’s not covered.

Like all insurance products be sure to review and update your coverage as your circumstances change.

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