Understanding Your Auto Insurance Policy

7 Parts of the Typical Auto Policy – DDICCEE

Understanding your auto insurance policy and how and why it is constructed in the way that it is will help you get the best auto insurance protection from the coverage you buy.  An insurance policy is a legal agreement.  Your auto insurance policy is a contract between you and the insurance company.  You expect certain things from the coverage you buy and your insurance company expects things from you in return.  We could spend hours going through the typical auto insurance policy but just understanding the major parts that exist in all auto insurance policies will help you understand your auto insurance.  The acronym DDICCEE are the first initials of the major sections found in your auto insurance policy.  I’ll explain them in detail in the following outline and they are not necessarily in the order you may find them in your policy (but it should be close).

D – Declaration Page (sometimes called the Dec Page)

The declaration page is a part of your policy.  If it were not for the declaration page, most policies issued would be the same for everyone.  You see, the declaration page personalizes the coverage provided by your auto insurance for your specific requirements.  That is why we could say that every policy is about the same except what is different for each of us.  In understanding your auto insurance policy you should know the things you should expect on your declaration page:

• Policy number
• Coverage start and end dates
• The name of the first named insured (you)
• The address of the first named insured (your mailing address)
• Recitation of your selected coverage
• List of endorsements and policy provisions and versions that apply
• List of discounts that you have earned or qualify for.
• Lender or Lessor’s interests are shown giving the a security interest in your car or cars.
• Summary of the premium charged, showing any credits or discounts, and total premium for the policy.

D – Definitions – The important language and words in the policy are defined as they apply to this policy.

Many words have meanings that are slightly different in a policy than they have in other circumstances and situations.  Since understanding your auto insurance policy requires you know that insurance is a legal document, if there is a meaning for a word that the company is relying upon, they will show the word and the meaning they intend for the term in the definitions section of the policy.  In many insurance policies, when a word that is specifically defined is used in the policy language, that word appears in bold text so you know that special meaning applies to that word.

I – Insuring Agreement – These are the Mutual Promises

“In return for your timely payment of premium and your compliance with all the provisions of this policy, we agree to provide the coverage you have purchased.”  OK, not quite what a policy says but it is the agreement in principle.  But here is what actually constitutes the “Agreement” in the ISO PP 00 01 01 05 version of the personal auto policy.  There may be different “insuring agreements” for different parts of your coverage.

“In return for payment of the premium and subject to all the terms of this policy, we agree with you as follows:”  Pretty straightforward.  Since the company is making the important promises you are paying for most of what follows these words describes the coverage and terms you have bought on your auto insurance policy.

C – Coverage – These are indicated on the declaration page.  The coverage you have purchased.  This includes the exact language used to provide the coverage you have purchased.

Understanding Your Auto Insurance Policy starts with understanding the coverage you have chosen.  These choices are specified on your declaration page.  While the coverage may be difference from auto to auto on a multi-auto policy, if it isn’t listed you probably don’t have the coverage.  You may have BI-PD Liability, Medical, UM, UIM, UMPD on a car of little value, and on another have the addition of Collision, Comprehensive, Towing, and Transportation Expense.  If it isn’t showing a premium for the coverage you probably don’t have the coverage.  That is a general statement as some coverage might be free on some company insurance plans but make sure you are getting what you want.  Anyway, the insurance company goes to great lengths to explain what they mean by each of the coverage parts you select and this is where the language appears to include the protection you have chosen.

C -Conditions – These might be considered the Rules.  Includes your “duties” as part of the coverage.

Conditions can be considered the mutual expectation of performance under the policy but they mostly lay out how you and the insurance company might enforce the policy upon the other when there is disagreement.  Common areas inside the Condition’s section of the policy include Abandonment, Appraisal, Arbitration, Subrogation, other insurance, your obligations after a loss to protect the property from further loss, Other insurance, when a lawsuit against the company can be justified, What to do when losses happen, and your obligations to the insurance company after a loss.  These are but a few of the conditions, or rules, you’ll find in the auto insurance policy.

E – Exclusions – What type of property we cannot cover, or what kind of perils (causes of loss) we are not including.  There may also be limitations.

Examples of exclusions include an exclusion for “wear and tear”, intentional acts, Nuclear damages, and Earth movement.  On your auto insurance policy a carrier may permit you to buy back an exclusion for an additional premium.  That same holds true to limitations to coverage.

E – Endorsements – Endorsements May add or Subtract or Amend the policy and coverage it provides.  Sometimes referred to as a “Rider”.

An Endorsement is ubiquitous in the auto insurance policy.  The large insurance companies may use a standard policy form in many states and then use an “amendatory endorsements” to bring it into compliance with Ohio law, or the law of a state where you reside.  Amending policies also occurs under a provision in law called “liberalization” but amendatory endorsements usually make something fit laws that apply in a state.  One type of endorsement is when you add a special form of property to a policy provision that adds coverage where none existed in a stock policy.  Let’s say that you buy a new car on an 84 month repayment term.  We add the Gap coverage to the policy.  No coverage exists for Gap losses unless the endorsement is added.  This endorsement adds coverage.  Let’s say that Ohio changes their laws during the year and the company issues your renewal with an Amendatory endorsement changing the language so that the policy you were provided complies with the law of Ohio.  This is an amendatory endorsement.  During the year, your son develops into a bad driver that will require cancellation of your policy unless he is excluded from coverage.  An endorsement is issued to exclude your son as a driver and this endorsement removes coverage from the policy for your son as a driver.  Endorsements may add or subtract or amend coverage and that is why it is important for you to understand your auto insurance policy.

S – Summary – This is not part of your policy but concludes this document.

Nearly all policies are constructed with these essential parts:  Declaration page, Definitions, Insuring Agreements, Coverage, Conditions, Exclusions, and Endorsements.  The fact that there are thousands of insurance companies doesn’t change the basic statement that the latter items in some form, or in some organization, appear in almost every policy.  Understanding Your Auto Insurance Policy is made easier when you know these essential parts.  Expect to see them and recognize them as important parts of your coverage.  Even if your company may label the essential parts with slightly different language you will find these ingredients in the recipe used to make your auto insurance coverage.

Terry McCarthy has 37 years of insurance experience and is qualified to help you get the best coverage at the least cost.  Contact him at (513) 779-7920 Monday – Friday from 9 – 5 most days for personal attention and expert advice on insurance for auto, home, business, life, retirement, and other needs.  Other hours are available by appointment.