This series of articles will take you through a fault-based auto policy, explaining the terms, coverages, exclusions, limits, and other provisions, which are not always self-explanatory to the layperson.

Insurance company duty

Your auto policy is a contract or an agreement between you and your insurance company. In a nutshell, your auto insurance provider is agreeing to insure you for the coverages and limits of liability set out in the policy declarations page in exchange for your premium payments, as long as you pay when the premium is due. Sounds simple enough. You pay them on time, and they’ll cover you if you have an accident. So why is my policy thirty pages long?

Your duties

The sample fault-based policy on which this material is based is my own policy with a large insurer based in California, but it is similar to most fault-based policies around the country. The policy begins by telling you—the policyholder—to send your insurance provider prompt notice of the accident (i.e., time, place, and circumstances of the accident, including the names and addresses of any injured persons and witnesses), no matter who was at fault. These are your duties. This notification could become the first bone of contention with your insurer! Was your notice prompt?

As an insured car owner, you have other duties, as well. If you are making a claim for any coverage under the policy, you have to:

• cooperate and assist them with the claim
  
• send them any legal papers you received related to the claim
  
• have a physical exam with a doctor they choose (at the company’s expense) if they ask you to (if you are injured, that is)
  
• give them permission to obtain your medical and other records

There are other duties depending on what type of coverage you are making a claim under, and we’ll go into these in separate articles when discussing the individual coverages.

Looking “under the hood” of a fault based automobile insurance policy

Generally, fault-based auto insurance policies are divided into sections (our sample policy calls “Parts”). Each part describes a type of coverage. The parts of our sample fault-based policy are as follows and will be discussed in separate articles:

Part I – Liability

Part II – Expenses for Medical Services

Part III – Automobile Death Benefits

Part IV – Uninsured Motorist

Part V – Car Damage

Part VI – All Risks Physical Damage

Part VII – General Provisions

In addition, see separate articles on your Policy Declaration Sheet and Policy Definitions.

Within each part, the policy tells you what is covered, any definitions that apply only to that part, any additional payments the company will make to you or for you within that coverage, what exclusions apply (i.e., what they won’t pay for), what limits apply, and any other provisions that pertain to that coverage only.

Insurance policies are not “beach reads” but understanding what coverages and limits are available and what is not covered is a critical step not to leave you financially insolvent.