Understanding an Insurance Policy
Have you read every single section of all of your insurance policies? You should, even if that sounds like a painful experience. If you don’t take the time to figure out the exact limits of your policy, you might think you’re protected when you really aren’t. Insurance policies contain very specific language to define exactly what is and isn’t covered. Parsing such legalese is always daunting, but this article will help you understand the basic layout of insurance policies. There’s some variation from industry to industry, but in general this is what you can expect to find.
Get a Certified Copy
It’s imperative that the policy you’re reading is the one you’re actually covered by. It won’t do any good to just look up something similar on the insurer’s website. One missing form can make all the difference in your coverage. Request a complete and certified copy from the insurer before you begin to plumb the depths of your policy.
Often the first page of a policy, the declarations page will list many of the overall details, including the names of the insured, addresses, dates, coverages and coverage limits. This page will also list the other forms included in the policy so you can tell if you’re missing anything. Of course, the name and contact information of the insurance company are also listed.
Insurance policies often use terminology differently than it would typically be interpreted in everyday language. In order to clarify the contents of the policy, any unusual use of language will be clearly set forth in the definitions section.
Most insurance policies require that both the insured and insurer meet certain conditions. If you violate the conditions, a claim that is otherwise covered could be void. For example, in the case of a covered loss, you may be required to send signed, sworn proof of the loss within a certain time period. If you wait until after the indicated period to notify your insurer of the loss, your claim will be invalidated.
Coverage or Insuring Agreement
Insurance policies begin to describe coverage by casting a wide net. There may be insurance agreements throughout the policy, but generally the main perils insured against will be collected together in one section. Examples of coverage are personal property, personal injury and so on.
After the net is cast, the policy will begin to narrow down the coverage by excluding particular situations. For example, your personal property may be insured through a homeowner’s policy, but any damage caused by animals owned by the insured will be excluded from coverage. Exclusions may be detailed anywhere in the policy.
Coverage may be further refined by exceptions to exclusions. Exceptions add some of the coverage removed by an exclusion back into the policy. They will not be clearly labeled, but will be listed with whichever exclusions they affect.
Finally, an existing policy may be modified with an endorsement. Endorsements, also called riders, usually extend the policy by adding another insured party or more coverage to the policy. For example, fine art, family jewelry or musical instruments usually have a higher value than the standard coverage and require an endorsement.
It’s important to check your insurance policy to make sure that everything is as you expect. It’s not uncommon for an insurance agency to make small mistakes somewhere in the policy language. As small an error as it may be, such a mistake can cost you a great deal of money in the event that you need to make a claim. Therefore, it’s your responsibility to carefully read and ensure your policy covers what you think it does.