policies are a contract between you and the insurer, and are not written so
the average person could pick one up, read it from front to back, and come
away with a meaningful understanding of what they just read. The structure
of a policy is usually very confusing, and they are loaded with special
definitions. Fortunately, most insurance contracts share a similar
structure. Once you understand how it is structured, you are in a much
better position to understand what is and what is not covered under the
contract. Insurance policies contain the following general sections, but are
not always set-up in the same order.
Declaration Page - A
declaration page includes the name and address of who is insured, the
issuing carrier, what risks or property are covered, the policy limits, the
coverage effective dates and policy numbers. Depending on the policy type,
the premium, deductible and a list of applicable endorsements may also
You want to look this over carefully
to make sure it lists what you want it to list. Are all of the coverage’s
you discussed with your insurance agent included? Are the limits of
liability or deductibles correct? If not, make sure you meet with your agent
and make the corrections immediately. You don’t want to wait until you file
a claim to find out you are not covered.
Definitions - Many of the key
terms will be defined in this section. You won’t be able to understand the
coverage without a basic understanding of the defined policy terms. The
definitions section normally appears in the general conditions section, and
is usually printed in bold type. It is a good idea to either pull it out of
the policy or make a copy of it, so you can keep referring to it as you read
the rest of the policy. Many people make the mistake of assuming that the
words in the policy have a meaning broader than what is defined in the
policy. The insurance company includes these definitions in the contract for
a very good reason as it protects against claims and court cases. Companies
go to great lengths to define their terms as clearly as possible.
Coverages - Your insurance
policy will discuss each coverage separately. For each type of coverage, the
policy will usually define the meaning of the limits listed on your
declaration page. Read these very carefully, because sometimes there are
lower limits for certain defined types of loss. In addition to the
definition of the limits, each coverage type will have an insuring agreement
and a list of exclusions.
Insuring Agreement - This is
the meat of the policy. In this section the policy will define all of the
coverage you have just purchased. Make sure you have your definitions handy
when you are reading this section; it will be full of defined terms.
Sometimes the coverage section will contain its own definitions or
re-definitions of some of the terms. This portion of the agreement generally
uses broad language to describe the coverage offered. Read this part very
carefully and make sure you understand it before moving on to the exclusions
Exclusions - This section
literally takes away much of what was described in the insuring agreement.
This part informs you how the coverage is limited. Usually, the exclusions
are much longer and more specific than the insuring agreement. It is
important to understand what is excluded. If you are not comfortable with
what you have read, then by all means, contact your agent to discuss any
concerns or confusion you have.
General Conditions - This
section is perhaps the most straightforward and easy to understand section
of your policy. Here, you will find what you are required to do in the event
of a loss. Also, other general policy terms will be listed in this section.
This section may appear less critical, but failure to comply with the
general conditions could jeopardize your coverage. Make sure you understand
what is expected of you.
Reading an insurance policy can be
overwhelming. It is a good idea to set it aside for a day after you have
read it, then pick it back up and read it again. Whatever you do, don’t just
file it away if you aren’t comfortable with it. An insurance policy of any
kind is not going to be easy, enjoyable reading, but the better
understanding you have of the general structure, the more assured you can be
of having the correct amount or type of coverage for your needs. A great
website to start researching policies and finding answers to your questions
Remember, if you have any questions, or you feel uncomfortable about what
you read in your policy, contact your insurance professional.
- Types of Insurance and
- Having a health insurance policy
is one of the most important policies you will own. Without a health
insurance policy, you can suffer devastating consequences. It is better to
be covered, than not. When searching for a health insurance plan, or if
you already have signed up for one through work, the plan terms,
descriptions of provisions and coverages, can be hard to understand.
Listed below are some common coverage terms to help you understand more
about what your health plan has to offer.
Your deductible refers to the amount
of money you need to pay, before any benefits from the policy can be paid on
your claim. Co-insurance / co-payments, are the amount that would need to be
paid by you before the insurance pays, and is in addition to the deductible.
The lifetime maximum is the most amount of money the health insurance policy
will pay for the entire life of the policy.
Exclusions are the things that the
insurance policy will not cover. As you are reviewing your exclusion’s
section, take a look at the size of the list. If it is a large list, then
the insurance company has tried to record all of the exclusions listed
throughout your policy; if it is a short exclusions list, this usually means
that they are listed throughout your policy. Be careful when you read this
list; make sure you understand it and you don’t miss anything. And a final
note, there are pre-existing conditions. This refers to a medical condition
you or someone in your family had before you obtained the policy. Some plans
will cover pre-existing conditions, while others will exclude them.
Another important policy to consider
is a homeowner’s insurance policy. If you have a lien against your home,
then you are required to have it insured. It only makes sense to have your
home insured, because your home and belongings are the most important and
valuable assets you own. A homeowner’s policy is designed to protect
homeowners, but of course there is usually a deductible to meet before you
file a claim. The larger the deductible, the less expensive your homeowners
policy may be.
A typical homeowner’s insurance
policy is divided into two parts: Property Protection and Liability
Protection. Property is usually listed on the declarations page. Property
Protection is normally broken down into four additional sections: dwelling,
other structures, personal property and loss of use.
The Dwelling section covers your
house, attached structures, plumbing, heating, and electrical. Other
structures covers detached structures, such as garages, storage sheds,
fences, driveways, sidewalks and patios. Personal Property covers personal
property, including the contents of your home and other personal items. Loss
of Use covers living expenses, if you can not live in your home while it is
Then there is the Liability
Coverage’s section. This section is broken down into two parts, personal
liability and medical payments. The Personal Liability section provides
personal liability coverage against a claim or lawsuit resulting from bodily
injury, or property damages to others that was caused by an accident on your
property. The medical payments section includes coverage to pay medical
expenses for people accidentally injured on your property.
As you are becoming more familiar
with the structure of an insurance policy, we can not forget about the
exclusions section. Most policies do not cover injuries to animals, damage
to motor vehicles or aircraft. Nor do they normally cover losses due to
floods, mudslides, water damage from sewer backups, war or nuclear hazard,
neglect, earthquakes, or power failures. To cover these exclusions, it will
cost you extra.
Congratulations in taking the first
important step towards protecting yourself or your property by purchasing an
insurance policy. It makes sense to learn how to read and understand it. By
doing so, you have gained the knowledge you need to ask the right questions
when seeking advice from your insurance agent and potentially saving
yourself a great deal of stress or heartache in the event you need to make a
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