Can Auto Insurance Consumers Understand Their Policies?

by Matthew Glans on May 20, 2011

Insurance policies are not always easy to understand, full of legal terms and phrases that those without a law degree may not easily understand. Despite efforts by around 30 states to makes policies clearer by enacting laws designed to simplify the language in insurance policies, many policyholders remain in the dark over the language in their insurance policies.

In a new poll conducted by Harris Interactive and commissioned by, “87 percent of drivers who currently have auto insurance said they had read at least part of their auto insurance policies. Thirty-six percent of surveyed drivers who had read their auto insurance policies found them to be somewhat or very difficult to understand.”

What causes this confusion? In some instances the terminology used in the policies can confuse policyholders. Insurance agents have also found that the length of the policies can create problems with consumers not fully reading their policies and being unaware what their polices actually cover. In the InsuranceQuotes article, John Couture, a State Farm agent argued that many of these problems can be solved by individual agents being more proactive with their clients, reading over their policies with them and discussing what is covered.

“John Couture, a State Farm Insurance agent in Gray, Maine, acknowledges that such distinctions often trip up his customers.

“I don’t think the terminology itself is that bad, but in an auto policy, you have the general provisions and then you go to the exclusions,” Couture says. “If you don’t read them through completely, you may not realize that something isn’t covered.”

For instance, if a policyholder is involved in an accident while driving someone else’s vehicle, he may think that he’ll be covered under his policy, but the coverage may not apply because of an exclusion buried in his policy.

To make sure his customers understand their policies, Couture goes over the details with them in person.

“When someone gets coverage, even if he says he knows what’s covered, we’ll almost always go through the general provisions,” Couture says. “Obviously, though, we can’t go through every single possibility.”

Eli Lehrer, Vice President at The Heartland Institute argued in the article that working with your insurance agent to ensure you have the coverage you need is more important then how a your policy reads.

“What’s important is getting the right coverage,” says Eli Lehrer, a spokesman for the Heartland Institute, a nonprofit research and education group.

“The policies are sold based on a standard of good faith, represented by what your agent has told you about the policy. Making sure that you have the right coverage and having an agent that you trust is a lot more important than knowing every little detail about your policy. Reading your insurance policy may not be the best way to spend your time unless you want to put yourself to sleep.”

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