How to read & understand a car insurance policy

We know. Reading an insurance policy isn’t exactly like curling up with a good book. It’s a fairly complex document that tries to explain all the things you’re covered for, and what’s excluded when a loss occurs. 

Although insurance companies now provide more simplified policy information, you still need to review the document carefully to make sure you understand your insurance policy. Here’s how.

The common parts of an insurance policy include:

Insurance declarations page

The policy declarations page – often called the “dec(k) page” – is basically the first page of the policy package. This page states who is insured and the time period the policy provides coverage. It also gives the general information such as a description of what’s insured, the coverages and primary coverage limits.

Definitions

This section gives you the definitions of words and phrases you’ll see in the policy. For example: “motor vehicle” and “deductible” are two terms often found in an auto policy. Such defined words may appear in bold print throughout the policy. You can also browse Nationwide’s insurance glossary for any unclear terms you’re looking for.

Coverages

This section describes the specific insurance provided. It lists what property is covered and for what damages. For example, a boat owner's policy may cover direct physical loss or damage to the boat and motor, portable equipment and other specified property. It can also provide liability coverage. 

Exclusions

These describe the coverage limits or how coverage may be eliminated depending on how a loss occurs. Insurers may allow policyholders to buy back coverage for some exclusions for additional premium (see endorsements below). For example, earthquake coverage may be excluded for people who live in an area where earthquakes are unlikely to happen. However, if a customer would feel more comfortable with the coverage, they could buy it back.

Limits and special limits

This section explains how much the insurer pays for particular losses or types of property. So while something is covered, it may only be covered up to a specific dollar amount or for a limited percentage of the entire loss.

Conditions

This section tells you what the insurer’s responsibilities are, and what your responsibilities are as the customer. This includes how to cancel a policy, transfer of rights or duties, and payment plans. 

Duties after a loss

This area gives guidance on what to do when a loss occurs. It includes notifying your insurer as soon as practical, notifying the police if appropriate and protecting your property from further damage.

Endorsements

This area defines optional coverages available for additional premium. An insurance endorsement may change your policy so that it better fits your needs. Amendatory endorsements may also be added by the insurance company (at no extra cost) to clarify policy terms and language.