When drivers don't understand what their policy actually covers, they're more likely to be blindsided by a claim and pay for coverage they don't need.
September 27, 2026
Only 58% of auto insurance customers say they completely understand their policy and what it covers — down 4 percentage points from the year before, according to the J.D. Power 2026 U.S. Auto Insurance Study. That means roughly 42% of drivers, or more than 2 in 5, are paying every month for coverage they don't fully grasp — and the gap is widening, not closing.
The study, based on responses from more than 52,000 auto insurance customers surveyed between April 2025 and April 2026, points to a problem that goes well beyond confusing paperwork. When drivers don't understand what their policy actually covers, they're more likely to be blindsided by a claim or to pay for coverage they don't need. More importantly, they're less likely to carry the right coverage when they actually need it.
Unless you're forced to use your policy after an accident, you may never really get a chance to see how it works.
When you’re buying coverage, the insurance agent is likely concerned with upselling and you’re concerned with keeping costs low. More times than not, nobody is having a real conversation about the policy provisions, and what is really necessary.
There's a big difference between having car insurance and understanding it, and J.D. Power's research shows that clearly. Its study asked drivers whether they completely understood their policy and what it covers — and the share who do is falling, not rising. With more add-ons, coverage tiers, and state-specific rules to sort through, it's easy to see how drivers lose track of what they're actually paying for.
Understanding your coverage means being able to answer a few basic questions without pulling out your policy documents: What happens if you're at fault in an accident? What happens if the other driver has no insurance? What's your deductible, and does it apply the same way to every type of claim? If you're not sure about at least one of these, you're far from alone.
A few areas of confusion come up more than others, and they're worth understanding before you ever need to file a claim. For a broader overview, see BestMoney's guide to the different types of car insurance.
Liability coverage pays for the other driver's damages and injuries when you're at fault — it does not pay to repair or replace your own vehicle. “Full coverage” typically bundles liability with comprehensive and collision coverage, which do cover your own car.
Drivers sometimes assume “insured” means their own vehicle is automatically protected, which isn't the case under liability-only policies. BestMoney's guide on liability vs. full coverage breaks down exactly where that line falls.
One of the costliest mistakes is carrying only your state's minimum liability limits. You may save a relatively small amount on your premium but become personally responsible for a much larger amount after a serious accident.
For example, if you only carry $15,000 or $25,000 in property damage liability and cause an accident involving a newer luxury vehicle or several vehicles, the cost of the damage could quickly exceed your policy limit.
These two are often confused with each other. Collision coverage pays for damage to your car from an accident with another vehicle or object, regardless of fault. Comprehensive coverage pays for damage from non-collision events, such as theft, vandalism, fire, weather, or hitting an animal. Having one without the other can leave a real gap, depending on how the damage happened.
“You shouldn’t get rid of comprehensive and collision coverage without considering whether you could afford to replace the vehicle. A question I always ask my clients when this comes up is, ‘If you were to be involved in an accident, whether it's your fault or not, are you okay walking away without any money for the vehicle?’” says Bermudez.
This pays for your injuries and, in some states, your property damage if you're hit by a driver with too little insurance or none at all. It's optional or has low minimums in many states, which means plenty of drivers carry less of it than they'd need. That's a real risk: the Insurance Research Council estimates that one in three U.S. drivers (33.4%) were either uninsured or underinsured in 2023.
“Uninsured/underinsured car insurance is very cheap. Generally no more than $20 a month and should absolutely be purchased,” says Goharzad. Pricing varies by state, insurer, and the limits you choose, so ask for a quote on this coverage specifically.
A deductible is the amount you pay out of pocket before your insurance kicks in and covers a claim. In most cases, comprehensive and collision each have their own deductible. Drivers are sometimes surprised to find that a lower premium comes with a much higher deductible, meaning they'll pay more out of pocket than expected when they file a claim. If you're weighing that tradeoff, here's when it makes sense to adjust your deductible.
Separate J.D. Power research cited alongside the 2026 study found that nearly a third (32%) of auto insurance shoppers now use AI tools when comparing coverage — yet a similar share (33%) said the AI-generated content they received wasn't helpful. That combination is telling: drivers are actively looking for help understanding their options, but the tools they're reaching for don't always close the gap.
There's still no substitute for reading your own declarations page and asking direct questions before you buy — whether you're researching with a search engine, an AI assistant, or an agent on the phone.
The consequences aren't just academic. Drivers who don't fully understand their coverage tend to fall into one of two costly patterns:
Being underinsured when it matters most — discovering after an accident that certain types of damage or at-fault situations aren't covered, or that your liability limits are too low to cover the other driver's costs.
Paying for coverage they don't need — carrying full coverage on an older vehicle that's worth less than a year or two of premiums, or duplicating coverage they already have through another policy.
It also affects how drivers feel about their insurer. J.D. Power found that customers who fully understand their policy are more satisfied overall and more likely to renew and recommend their insurer. Either way, the remedy is the same: know what you're paying for before you need to use it, not after.
You can close most of the gap without becoming an insurance expert:
Read your declarations page once a year. It lists your coverage types, limits, and deductibles in one place — and most drivers have never read it in full.
Ask your agent to walk through a hypothetical claim. “What would happen if I hit a parked car?” or “What if an uninsured driver hits me?” turns abstract coverage terms into something concrete.
Check your coverage against your vehicle's actual value. This matters most if your car is older, since that's where a lot of unnecessary spending on full coverage happens. Our guide on how much car insurance you need can help you size it up.
Compare quotes with the same coverage levels side by side. A cheaper premium sometimes means less coverage, not a better deal, and it's easy to miss that difference when you're not comparing quotes apples to apples.
Use AI as a starting point. “This is where AI can help as ChatGPT, for example, does not have a vested interest in your policy limits and will be able to guide you based on your assets and risk,” explains Goharzad. Just remember that a third of shoppers found AI answers unhelpful, so confirm anything you learn against your own policy documents.
If you're unsure whether your current policy still fits your situation, BestMoney's car insurance comparison tool lets you compare coverage and rates from multiple providers side by side — a useful way to sanity-check what you're paying for against what else is available. It's also worth reviewing these common car insurance mistakes before your next renewal, since several of them stem directly from the same coverage gap J.D. Power has highlighted.
It's the summary page of your policy. It lists who and what is insured, each coverage you carry, your limits and deductibles, your premium, and the policy period. Your insurer typically includes it with your policy documents, and many make it available in their app or online account.
No. “Full coverage” isn't an official coverage type — it usually means liability plus comprehensive and collision. Extras like uninsured motorist coverage (where it's optional), rental reimbursement, roadside assistance, or gap insurance may not be included unless you add them.
Often not. State minimums set the legal floor, and in many states they're low compared with what a serious accident can cost. If damages exceed your limits, you could be personally responsible for the difference.
Consider it when your car's value is low enough that the coverage costs more than it would realistically pay out after your deductible — and only if you could afford to repair or replace the car yourself. Compare your annual cost for these coverages against your car's current value before deciding.
More than 2 in 5 drivers don't fully understand their car insurance, and that share is growing. The fix doesn't require becoming an expert: read your declarations page, make sure you know how liability, comprehensive, collision, and uninsured motorist coverage apply to you, and ask your agent what would happen in a real claim. A few minutes of review now can save you from an expensive surprise later.
Anna Baluch is an insurance and finance expert at BestMoney.com. With over a decade of writing experience, she specializes in insurance, banking, mortgages, personal loans, and retirement planning. Her work has been featured in publications like Forbes, Newsweek, Fox Business, Credit Karma, Insurify, and Realtor.com. Anna holds a bachelor’s in marketing from Northwood University and an MBA from Roosevelt University. Her goal is to empower consumers to make smart financial decisions.
