What Are Insuring Agreements for Auto Insurance Policies?

Your auto insurance policy's insuring agreements section might be the most laborious to understand, but it is also arguably the most important. This section, which includes the definitions of the terms used throughout the policy, outlines what the insurer agrees to provide in exchange for your premium payments. This is where you find the policy's coverage in its broadest strokes before it is narrowed by exclusions. Auto insuring agreements typically have four major sections.

Liability

Liability auto insurance is mandatory in nearly every state. This coverage is likely the first one that appears in your policy's insuring agreement. Subject to your insurer's conditions and exclusions, the agreement generally reads that the insurer agrees to pay for bodily injuries and property damages that you cause unintentionally with your insured automobile, up to the liability limits you choose. Common exclusions for this coverage include business use of your vehicle, intentional acts of damage and using your vehicle for hire, such as a taxi.

Medical Payments

Medical payments, or MedPay, coverage is usually optional, but it will likely appear in your insuring agreement anyway because it is related to liability coverage. MedPay covers injuries that you or your passengers suffer in or around your vehicle regardless of fault. Many insurers consider non-collision injuries, such as fingers shut in the car door, covered under MedPay. Settlements of this type usually happen quickly, whereas insurers typically make liability injury settlements in a single lump sum after all bills are collected at the end of a claim.

Uninsured and Under-insured Motorist

Uninsured and under-insured motorist coverage is mandatory in some states and usually follows the liability and medical portions of your insuring agreement. If you or your passengers are injured by another party but that person does not have a valid insurance policy to cover your damages, your uninsured motorist coverage pays on his behalf. If his policy can only cover a portion of your damages, your under-insured motorist coverage pays the balance. Some states require that your under-insured motorist coverage limit exceed the responsible driver's liability limit to be considered valid coverage.

Damage to Your Vehicle

Often, collision and comprehensive, sometimes called other-than-collision, coverages appear under the heading "Damage to Your Vehicle" in your policy's insuring agreements section. If you have a car loan, your lender likely requires you to purchase these coverages which pay for any repairs on your vehicle after a loss. If the car is totaled, the insurer will pay its actual cash value. The types of losses that comprehensive insurance covers vary widely between insurers so check your insuring agreement to see what the limitations and exclusions are before you file a claim.

References

• International Risk Management Institute: Insuring Agreement
• Insure.com: How to Read (and Actually Understand!) Your Insurance Policy
• 1 Auto Car Loans: Understanding Your Auto Insurance Policy
• Insurance Money Saver: The Personal Auto Insurance Policy Insuring Agreement and Definitions
• Utah Department of Insurance: Understanding Your Insurance Policy (PDF)