Whether you’re shopping for a new insurance company or preparing to renew your existing auto insurance policy, it pays to review your coverages, deductibles, and discounts.
Taking a close look at your policy can help you determine whether you need to discontinue some coverages, increase limits on others, or add coverages to broaden your financial protection. A careful car insurance review can help you save money and alert you to inadequate coverage that could put your assets at risk.
How to Check What Your Policy Covers
Car insurance policies include different types of coverages, some of which are required by law or mandatory for leased or financed vehicles. Others are optional. You can find all of this information on your policy declaration page. The declarations page typically appears on the first page of your policy. Review it carefully to make sure all information is correct.
Declarations pages usually include:
- The name of the insurance company
- The policyholder’s name and address
- The policy number
- The effective and renewal dates of coverage
- A list of drivers
- Details about the vehicle such as its make, model, and vehicle identification number
- Coverages and coverage limits
- Premiums for each coverage type
- Endorsements or riders
Some coverages are subject to limits and others to deductibles. It might sound complex, but it’s important to periodically review—and possibly alter these limits and deductibles—especially before renewing your policy or switching to a new carrier.
Reviewing Your Auto Coverage Details
If you’re at fault for an accident, your bodily injury liability coverage will pay the medical expenses of the other driver and their passengers. Likewise, your property damage liability coverage will pay to repair the other driver’s vehicle.
Liability coverages pay up to a limit you choose. For instance, your policy may pay up to $50,000 per accident for bodily injuries and $25,000 for property damage.
If the costs of an accident exceed your policy's limits, you’re on the hook for the remaining expenses.
State laws require automobile owners to buy minimum amounts of bodily injury and property damage liability car insurance. For example, California requires drivers to carry at least $15,000 in bodily injury liability coverage per person and $30,000 per accident, plus $5,000 in personal property liability coverage.
However, mandatory liability coverages don’t provide all the protection you might need. On average, a hospital stay costs $10,000 per day, according to the U.S. Centers for Medicare and Medicaid Services. If you’re at fault for an accident that causes serious injuries or property damage, the minimum coverages won’t provide enough financial protection.
If your policy only provides minimum liability limits, you may want to consider increasing your coverage to somewhere between $100,000 and $300,000.
Collision and comprehensive coverages protect your automobile. Collision insurance pays to repair or replace your car following a covered accident. Comprehensive coverage pays to replace stolen vehicles and covers non-collision damages caused by falling objects, fires, floods, storms, vandalism, or collisions with wild animals like deer.
State laws don’t require you to carry collision or comprehensive coverages. But if you finance or lease a car, the lender or leasing company will require you to buy both coverages.
After you pay off your automobile, you can discontinue these coverages if you choose, but first, consider the risks. Can you afford to buy another vehicle if yours is stolen or totaled?
If your vehicle has a market value of $5,000 and your collision insurance has a $500 deductible, it makes good financial sense to keep the coverage. But if the car is only worth $1,000, the cost of insurance likely outweighs the benefit of collision coverage.
Comprehensive coverage is more affordable than collision insurance—$134 per year, on average—making it a good value if your car still has a market value of a few thousand dollars.
Medical payments coverage helps pay the medical expenses of you and your passengers after a covered accident. Medical payments coverage is only required by law in Maine and Wisconsin, but it can provide worthwhile protection, even if you have health insurance.
While medical payments coverage only pays expenses up to a specified limit, it can help pay health insurance copayments and deductibles, as well as costs such as emergency room bills.
Several states and Puerto Rico require drivers to carry personal injury protection (PIP) coverage, also called no-fault insurance. PIP also pays the medical expenses of you and your passengers, and it may also cover funeral expenses, lost wages, and the costs of everyday services you can’t perform while recuperating from injuries, like childcare and lawn maintenance.
Deductibles apply to collision and comprehensive coverages. The deductible is the amount you must pay following a covered loss. For example, if you have a $1,000 collision deductible and your car sustains $2,500 in damages, the carrier will pay a maximum settlement of $1,500.
Increasing your deductible will lower your policy’s premium. However, you should set your deductible at a level you can afford to pay out of pocket. Typically, auto insurance deductibles are set at a specified dollar amount rather than a percentage.
Usually, providers allow you to set separate collision and comprehensive deductibles. Since comprehensive coverage is typically more affordable than collision insurance, consider choosing a lower comprehensive deductible to get the best benefit for relatively minor claims, such as a broken windshield.
Your policy may include endorsements—or riders—which are optional add-ons that amend its standard coverage. For example, it might have endorsements for full glass replacement, rental car reimbursement, or roadside assistance.
Typically, you can add these optional coverages when you purchase or renew a policy. If you’re about to renew your policy, review the extras you already have and look for others offered by your insurer in case your needs have changed.
Look for Discounts
Insurers offer a wide range of car insurance discounts and usually allow you to stack several discounts for which you qualify, enabling you to maximize savings. If you’re not sure whether you qualify for one or more discounts, ask your insurance agent. The most common discounts include:
- Safe driver/claim-free
- Good student
- Defensive driver training
- Driver training course
Make Sure All Drivers and Vehicles Are Covered
Typically, your auto insurance policy applies to the covered vehicle, regardless of who is driving it. However, car insurance contracts vary by company, so it’s important to list all regular drivers on your insurance policy. Ask your insurance agent whether your policy will cover your automobile if you loan it to a friend or family member.
Your policy may cover your car when it is used by an unlisted driver who has permission to drive it, but may not cover it if someone takes it for a drive without permission. For instance, if a neighborhood teenager takes your vehicle for a joyride and has an accident, your policy may not cover the damages.
Make sure you have an auto policy for every car you own. When possible, buy policies for all your automobiles from one carrier, since many insurers offer multi-vehicle discounts.