The Auto Policy

You must learn to piece together your Auto Policy, Declarations, and the Endorsement pages to beat your insurance adjuster

You made here. Now you can start reading the auto policy!

But wait! The auto policy does not read like a book. If you start reading from page 1 to 55, you will not understand anything. The policy will contradict itself.

The policy is divided into several different parts or sections. You need to understand how these sections “fit together” so you can navigate at ease.

The front page is very important, you need to see the state that the policy is for, and what edition of the policy. This is critical because in case of dispute, the law of the named state will be used to resolve the issues. This is true even if the accident was in another state or country.

Note, this is a dispute between you and your own insurance company, not against third parties. Disputes against third parties are controlled by the laws of the state in which the accident happened.  

The front page of the auto policy is also important because adjusters get comfortable with what most policies say.

They read policies every day and they used to the language and what they normally say. The effect is that most adjusters do not read your specific policy. They assume what the policy says.

The underwriting department (the people that write the auto insurance policy) sit down every month, sometimes every week and review these contracts. They make changes all the time. For example, if a policy reads:

“We will pay for essential services provided and loss wages.”

Two things are actually covered. Essential Services (you mowing your lawn, or grooming the dog)and the time that you are away from work.
If underwriting changes the auto policy to read:

“We will pay for essential services provided or loss wages”

Then one or the other is covered but not both. Changing one word affects the way the claim should be covered. If your adjuster is not on top of every single change in every policy, then your adjuster could be just telling you what she thinks the policy says, not what it actually says. You need to read your policy.  

Knowing your exact edition issue or date is very important when negotiating your claim. I cannot tell you how many errors I catch my MANAGER doing when thinking a policy read a certain way, when in fact it had been changed!

The first pages will give you information about how wonderful the CEO of the company is, and who is the CFO. Stuff like that, nothing that matters to anyone, unless you are an investor.

The table of contents of the policy will be laid out for you. There, you will see that there are different parts or sections to your policy. Some insurance companies number the parts.

Liability Coverage is 1, Personal Injury Protection is 2, and so on. Other insurance companies have the alphabet, Coverage A, Coverage B, Coverage B1.

They are the same coverages as they are explained in this website. Do not be confused.

The important thing to take from the table of contents is to see the actual layout of the policy. Where do coverage sections being and stop?

The next page should a DEFINITIONS PAGE. This is also a very important page. I would say this is the second most important page of the entire auto policy (the first being the declaration page).

The definitions page only will apply to those terms that are “re defined” later. Definitions in a policy may change on each specific section or coverage. I will explain here in a short moment.

After the definitions page, you have the actual coverage section. All coverages will be listed on your policy as if were entitled to all coverages.

However, only the sections (coverages) outlined on your declarations pages will apply you.  

Usually, the first coverage to appear is liability. The very first thing you should read is the INSURING AGREEMENT, INSURING CLAUSE, or WE AGREE TO portion right at the top.

This is the promise, or what the insurance company agrees to do for you. For Example:

“This insurance company will pay for all damages an insured person is legally obligated to pay –because of bodily injury or property damage meaning: 1. Bodily injury, sickness, disease, or death or any person, including loss of services; and 2. Damage to or destruction of property including loss of its use.”

Under these coverages, your policy protects an insured person from claims for accidents arising out of the ownership, maintenance or use, loading or unloading of an insured auto. The liability coverage continues to read:

“We will defend an insured person sued as the result of an auto accident, even if the suit is groundless or false. We will choose the counsel. We may settle any claim or suit if we believe it is proper.”

This language is very powerful, and unless you read it carefully, you will miss the detail.

This is the promise they are making to you in exchange of premium. This is what they agree to. Do you see how they slip two clauses against you? They included the rights of counsel concept (we will choose the attorney) and rights of settlement clause (we will settle as we see fit), but that aside, that is it their promise.

When reading any auto policy, you must start with the declarations page (to see if that coverage is listed), then you must move on to the Insuring agreement. After the agreement, you must look at the DEFINITIONS.

Which definitions? Well, you must look at the entire coverage section. If there is not subheading under the coverage part indicating “definitions”, then you must go to the first page where the original definitions are located at.

The first page of definitions applies to the entire auto policy, unless they are redefined on the specific coverage section. For example, under the Liability coverage the definition of “INSURED” should look like:

“You, Any resident and any other person using your insured auto with your permission”

Basically, an insured is any person behind the wheel of your car as long as they are using it with permission. A thief would be excluded!

But what about Johnny the 3 year old? Well, look at the criteria, is he a resident? If yes, then did he have permission? Here it will be a little tricky. Who gives the keys to a 3 year old? No one (in their right mind).

But note, it does not say that the engine must be on, or it must be moving. It says “using”. What is that mean?

Using could mean just sitting in it, or playing in it (like a three year old playing in the car).

In this case, you will have to see if the word “using” is defined in the specific section, if it is not, then you must look at the definition page in front of the policy.

If there is no definition for this word, then the Interpretation of the Policy concept will be applied.

Learn how to read your auto insurance policy
Auto Policy Declarations Page
The Actual Auto Policy Part I
The Actual Auto Policy Part II
Read your Policy Endorsements