Unpacking Auto Insurance Essentials - You Don't Know What You've Got Until You Watch This Video

Published Date: 12/26/2023

Unpacking Auto Insurance Essentials: What’s Really in Your Policy (and Why It Matters)

Most of us don’t think much about our auto insurance until something goes wrong—a fender bender, a stolen car, or that moment when the repair estimate makes your jaw drop. Suddenly, that piece of paper (or PDF) from your insurance company becomes the most important document in your life.

Yet few people actually understand what’s in their policy. They may know they’re “covered,” but covered how? For what? And how much?

Insurance expert Karl Susman, host of The Insurance Hour, breaks down the fundamentals of auto insurance in plain English, explaining what every driver should look for on their declarations page (or “dec sheet”) and how to make sure your coverage fits your real-world needs.

The Declarations Page: The Roadmap to Your Policy

Your auto insurance policy actually has two parts:

1. The Policy Form — This is the legal contract. It defines what’s covered, what’s excluded, and under what circumstances the insurance company must pay.
2. The Declarations Page (Dec Sheet) — This is the customized summary that makes the policy yours. It lists your name, address, policy dates, vehicles, coverage types, and coverage limits.

“If the policy is the instruction manual, the dec sheet is the cover page that tells you which model you own,” Susman explains.

Start by checking the basics:

• Is your name spelled correctly?
• Is your vehicle listed with the right year, make, and VIN?
• Do the effective dates match what you expect? (Policies are usually 6 or 12 months long.)
• Does the garaging address match where the vehicle is actually kept?

It sounds simple, but clerical errors happen—and a mistake could complicate a claim later. Make sure the paperwork actually represents you and your car.

Liability Coverage: Protecting Others (and Your Finances)

If you only remember one thing about your auto insurance, make it this: liability coverage protects everyone but you.

Liability coverage pays when you cause injury or property damage to someone else. It’s usually the first number listed on your dec sheet and appears in a “split limit” format such as 100/300/100.

Here’s what that means:

• $100,000 — The maximum the insurer will pay per person for injuries you cause.
• $300,000 — The maximum the insurer will pay per accident for all injured parties combined.
• $100,000 (often shown separately) — The maximum for property damage you cause, such as to another person’s car or fence.

That last number is crucial. Repair costs have skyrocketed, and even moderate collisions can exceed $50,000 in damage—especially with today’s advanced vehicle sensors and electronics.

“The difference between $50,000 and $100,000 in property damage coverage might only cost you three or four dollars a year,” Susman notes. “It’s one of the cheapest ways to protect yourself from a big financial hit.”

Collision Coverage: Protecting Your Vehicle in Motion

Liability coverage takes care of the other person’s car. Collision coverage protects your car—when you hit another object or vehicle while driving.

This coverage comes with a deductible—the amount you pay out of pocket before your insurer pays the rest. Common deductibles range from $500 to $1,500.

The higher the deductible, the lower your premium—but only choose an amount you can comfortably afford after an accident.

Collision Deductible Waiver (CDW)

One of the most overlooked features of auto insurance is the collision deductible waiver. If you’re hit by an uninsured driver, this add-on allows your insurer to waive your deductible entirely.

It’s inexpensive—often just a dollar or two per year—but can save hundreds at claim time.

“When I review policies and don’t see this coverage, it’s a red flag,” Susman says. “It tells me someone wasn’t paying attention when the policy was written.”

Comprehensive Coverage: Protecting Against Everything Else

If your car is damaged by something other than a collision—say, theft, vandalism, falling debris, fire, or a windstorm—that’s comprehensive coverage territory.

It also carries a deductible, and unlike collision, there’s generally no waiver available.

Interestingly, some adjusters classify animal collisions (like hitting a deer or cow) as comprehensive rather than collision. It’s one of those quirks of insurance that seems arbitrary—but it matters when deciding which deductible applies.

“It’s one of those things you never think about until it happens,” Susman laughs. “But it’s good to know where your coverage falls—even if it’s just so you can sleep easier counting sheep.”

Uninsured Motorist Coverage: Standing In for the Other Driver

One in six California drivers doesn’t have insurance. If one of them hits you, who pays? That’s where Uninsured Motorist (UM) coverage comes in.

This protection acts like liability coverage for the other driver—stepping in to cover your medical expenses (and those of your passengers) when the at-fault driver can’t.

Susman offers a simple rule of thumb:

“Match your uninsured motorist limits to your liability limits. If you’re willing to cover the other driver for $100,000, why wouldn’t you want the same protection for yourself?”

If your UM coverage is lower—or missing entirely—it’s worth a conversation with your agent. In California, insurers are required to offer it, and if you decline, you must sign a form acknowledging that decision.

Medical Payments: Small Coverage, Big Convenience

Medical payments coverage (sometimes called “MedPay”) is one of the simplest forms of insurance. It pays for medical expenses for you and your passengers—no lawsuits, no questions asked.

Think of it as a goodwill coverage: it doesn’t cover pain, suffering, or lost wages, but it can pay a doctor bill or an urgent care visit after an accident.

Susman recommends reviewing your limit carefully:

“If you see $1,000 or $2,000 listed, that’s outdated. Medical costs today can exceed that in one ER visit. Consider increasing it to $5,000 or $10,000—it’s usually inexpensive.”

Gap Coverage: Closing the Value Gap on New Cars

When you buy a new car, it loses value the moment you drive off the lot. If that car is totaled in an accident, your insurer pays the market value—not the amount you still owe on your loan or lease.

That’s where Gap Coverage comes in. It pays the difference between what the car is worth and what you still owe.

Example:

• You owe $45,000 on your loan.
• Your car’s value after the accident is $40,000.
• Without gap coverage, you’d still owe the lender $5,000 out of pocket.

Gap coverage fills that shortfall—and it’s one of the smartest add-ons for anyone financing or leasing a newer vehicle.

Replacement Cost Coverage: Getting a New Car, Not a Check

Some insurers offer an upgrade called Vehicle Replacement Cost Coverage. If your car is totaled within a certain period (often the first one to three years of ownership), the company will pay enough for you to buy a brand-new replacement—not just the depreciated value.

“It’s like having replacement cost on your home,” Susman explains. “If you want to be made whole, not just given a used-car check, it’s worth asking about.”

This coverage must typically be added when the car is new, so timing matters.

Rental Car Reimbursement: Don’t Get Stuck Without Wheels

If your car is in the shop after an accident, Rental Car Reimbursement pays for a temporary replacement vehicle.

It’s listed on your dec sheet as a daily amount—say, $40/day for 30 days.

Here’s what to know:

• The dollar limit is per day, including taxes and fees.
• The time limit varies, but 30 days is typical.
• It only applies when your car is disabled due to a covered claim (not for vacations or maintenance).

“A $20 daily limit made sense years ago,” Susman notes. “Today, you’ll need at least $40 or $50 to rent a car that’s similar to yours.”

If you have a second vehicle or flexible work arrangements, you might skip this coverage—but for most people, it’s worth the small cost.

Roadside Assistance: A Safety Net on the Go

Many policies include or offer roadside assistance, covering towing, jump-starts, lockouts, or tire changes.

Check your car’s manufacturer warranty before adding it—many newer vehicles include this service for free.

Also, read the fine print: some plans limit towing distance (e.g., 10 or 25 miles) or maximum payout per incident. If you travel frequently, consider a plan with broader coverage or a standalone auto club membership.

Custom Equipment Coverage: Protecting Upgrades and Modifications

If you’ve added expensive sound systems, wheels, wraps, or custom parts, your standard policy won’t automatically cover them.

You’ll need to declare the modifications and request an endorsement for the added value.

“If you don’t tell your insurer, they can’t cover it,” Susman warns. “And when something happens, you’ll be out of luck.”

For heavily customized or collectible vehicles, a stated value policy—which insures the car for an agreed dollar amount—is often the best choice.

The Takeaway: Know What You Have Before You Need It

Auto insurance isn’t just a legal requirement—it’s a critical safety net. But it only works if you understand it.

By reviewing your declarations page, confirming your limits, and asking questions about missing or unclear coverages, you can prevent costly surprises later.

“You don’t know what you’ve got until you need it,” Susman says. “But if you take 10 minutes to review your policy today, you’ll thank yourself tomorrow.”

Insurance may never be exciting—but knowing exactly what’s in your policy? That’s power. And in California’s fast-changing market, that’s something every driver needs.