How to Review Your Car Insurance Policy

Insurance adjuster assessing damage to car
Echo / Getty Images

Taking time to review your car insurance is an important part of your financial well-being. A lot of things can change and you may not realize an adjustment needs to be made to your car insurance. A review can catch this type of oversight. A review with your car insurance agent is recommended, but if you prefer to go it alone, get out your declarations page because here is what to look for.

Review Car Insurance Coverage

The coverage you select is obviously quite important.

Understanding your coverage is a necessity. It is impossible to have control over something you do not understand. Learn the different types of coverage so that you can make certain you make educated decisions.

Liability Limits: Liability limits really should not change often. It is the type of coverage you usually set and forget. However, if you started with the state minimum liability coverage you may want to consider increasing your limits. Preferred limits are $100,000/$300,000. If your assets exceed several hundred thousand dollars, you should consider increasing your coverage even more. Really looking to maximize your coverage? For the best protection available you will want to purchase an umbrella policy. A standard umbrella offers 1 million in liability coverage for autos, home, toys and rental properties.

Physical Damage: There is so much to consider when it comes to physical damage to all of your vehicles.

Physical damage includes comprehensive coverage and collision coverage. Four important things to consider when you review your policy:

  1. Risk: What is the likelihood of having your vehicle damaged? Well, nobody really knows when an accident will strike, but it is wise to try and use as much common sense as possible when determining your coverage. Do you live out in the country and see deer on a daily basis? Do vehicles regularly get damage in your work parking lot? Do you have a teenage driver that you are concerned with driving and damaging your vehicle? Think about different scenarios you come across regularly to help decide if physical damage coverage would benefit you.
  1. Value: Removing physical damage coverage from a car often is decided based on the value of the car. As the car depreciates, the argument for keeping physical damage coverage diminishes. For example, if your car is worth $2500 and you are paying $100 a month for full coverage car insurance, in two years you have essentially paid the full value of your car in insurance premiums. Do not forget you also have a deductible for physical damage. It is very likely in this scenario you would be better off saving the money from the high cost of physical damage and pay for the damage out of pocket if an accident were to happen.
  2. DeductiblesA car insurance review is a good time to revisit your deductibles. Deductibles reduce the cost of car insurance. The higher the deductible you select, the lower your car insurance costs. The deductible is the amount of money you agree to pay at the time of repair after a covered accident. You can select different deductibles for comprehensive and collision. Maybe you are looking to save some money and increase your deductibles. Or, maybe winter is coming and your emergency fund is very low so you want to lower your deductible just in case you are in an accident while driving on the slippery roads. Ask your insurance agent or customer service representative to select different deductibles and tell you the corresponding rate.
  1. Extras: Adding on a few extras to your car insurance can be nice, but it is a good idea to review those extras to make sure they make sense. Towing, car rental, accident forgiveness, minor violation forgiveness, OEM parts and more are available on most policies. A review is the best time to find out what coverage is available and how much it costs.

Make Sure All Vehicles Are Listed Properly: Errors can be made adding and removing vehicles from your policy. Always check to make sure the proper vehicles are listed. If you find an error, make sure to notify your car insurance agent immediately. 

Review All Possible Discounts

A long list of possible discounts is available from most car insurance carriers. Typically you can find a list of possible discounts along with a list of the discounts you are receiving in your car insurance renewal packet.

Sometimes you may not be sure of what a said discount actually means. For instance, a "membership discount" often refers to being a member of a credit union or other community type club. If you are ever unsure of what a discount is, make sure to contact your car insurance agent or customer service representative for an explanation.

Major Discounts to Verify You Are Receiving If Eligible

  • Financial Stability DiscountNearly all insurance companies use your credit score as a rating base for your car insurance rate. If you believe your credit score has improved recently, you can request your insurance company to rerun your score and any beneficial impact should be applied to your insurance rate fairly quick. Let your car insurance agent know and they should be able to look into it for you.
  • Multi-Car DiscountIf you have more than one vehicle insured with liability coverage or more, you are eligible. This is not a discount often missed, but it does not hurt to check for it just in case of a computer error.
  • Multi-Policy DiscountThis discount is a big one and overlooked more often than it should. Your insurance agent or representative has to manually add this discount at the time you add a second policy. If you find the discount is missing and you actually have multiple policies with the same insurance carrier, ask for the discount to be retroactive. Retroactive means you will get the discount backdated to the date you purchased the second policy and you should get more money back on your insurance cost.

Review Medical Coverage

Medical coverage requirements can easily change from time to time. Getting a new job and medical benefits, losing a job and losing your benefits can both affect your car insurance coverage. Sometimes even your current employer decides it does not want your primary health insurance to cover auto accidents anymore and you need to purchase coverage through your car insurance policy. It is a good idea to know how your policy is set up, how much medical coverage you carry, and whether or not you have a per person deductible for medical payments.

For instance, if you have a $500 deductible per person and there a four people in your immediate family, one car accident could cost you $2000 if everyone is injured even if it is minor. Not to mention the possibility of physical damage to your vehicle deductibles and expenses. These expenses can add up quickly and if you had no idea your policy was set up this way it could be a huge shock in an already stressful situation.

Review All Drivers

It is important to review the drivers on your car insurance policy for accuracy. All drivers who are related to the named insured, owner of the policy, need to be listed either as a driver or an excluded driver. Some exceptions will allow a family member to have their own separate policy with another carrier, but often proof of coverage will be required.

What to Look For

  • Many insurance carriers, but not all, require teens with permits to be added as a driver. It is important to discuss with your car insurance agent.
  • Did you know an excluded driver could be costing you money? Some insurance carriers charge for listing a driver as excluded even though zero coverage is provided if the excluded driver is driving at the time of an accident. For example, in Michigan, even though a driver is excluded his or her medical coverage is covered by an unlimited dollar amount if they are injured as a passenger in the vehicle. So, it makes sense the insurance carrier would collect some money for the coverage provided. If an excluded driver moves out of your household and has their own car insurance policy, make sure to notify your car insurance to have the excluded driver removed.
  • Traffic violations affect individual drivers. If a ticket is close to expiring, often a 3 years after receiving it, take a closer look at your renewal date. Sometimes if your ticket drops off shortly after your policy renews, you can have your policy rewritten through the same carrier or switch car insurance providers to get a lower rate sooner. Again, speak with your car insurance agent to fully understand what options are available to you.

Importance of Regular Car Insurance Reviews

A car insurance review is not only a good idea to save you money. It can also ensure you are covered properly at the time of an accident.? A car accident can be devastating on its own. Finding out you are not covered when you totally thought you were is something you never want to experience. Taking on some responsibility and reviewing your policy can save you from catastrophe.

Review Your Declarations Page Every Renewal

Most policies renew every six months. A packet of information is mailed or possibly emailed to you documenting your policy and coverage. Out of all the paperwork, your declarations page is the most important. It will have all of your information listed in hopefully an easy to read manner. Every time you get your car insurance renewal scan it for errors and use it as a reminder of your coverage options. Do not grab your proofs of insurance and throw away the rest without any thought. Car insurance is important and it is important to have it accurate both on the paperwork and in your mind.