Figuring out what insurance to buy and from whom can be a significant undertaking on its own. And trying to understand all the different parts of the insurance policy is a whole other headache that may leave you wondering who writes these kinds of obtuse documents. But it is important to know what youre paying for, what your obligations are, and what is and isnt covered. The article below discusses some of the more significant parts of an insurance policy so you have a better idea of what youre reading.
Insurance Policy Declarations and Definitions
The declarations page identifies the general who, what, and when of your insurance policy. It will specify who is insured, such as all the drivers in your household. It tells you what property or risks are covered and what the policy limits are. For example, it would identify your home and the $50,000 worth of personal property damage covered by your homeowners policy. It will also give the effective dates of the policy (such as a six-month auto policy, or a ten-year term life insurance policy). And to help you better understand the insurance contract, the definitions section explains key terms used within the document.
Insuring Agreement and Conditions
Next, the insuring agreement tells you in more detail what the insurance company promises to do or cover under the insurance policy. For example, the insurance company may agree to pay for the losses associated with a natural disaster, to defend you in a liability action, or pay for specified services, such as medical care. The following are the two key types of insuring agreements:
- Named-Perils Coverage: Only the perils specifically listed in the insurance policy are covered.
- All-Risk Coverage: All risks and losses are covered except for those specifically excluded in the insurance policy.
Similarly, the conditions part of the policy describes your obligations under the agreement. If you dont abide by these conditions, your insurer may be able to deny coverage that they would otherwise provide under the policy. Common conditions require you to file claims within a certain amount of time, cooperate with the insurer in a liability lawsuit, and mitigate additional damage under a property damage policy.
Insurance Policy Exclusions
The exclusions section of an insurance policy is also very important. It describes property, losses, causes of losses, or perils that are not covered. If you only read the policy declarations page and the insuring agreement, you may think youre paying for coverage that you dont actually have. For example, many homeowners policies exclude coverage for damage due to floods and earthquakes. And life insurance policies will often exclude death due to suicide or an act of war.
Insurance Policy Endorsements and Riders
Sometimes an insurer will change the wording, terms, or scope of your insurance plan, for example when you renew your policy at the end of the policy period. This might be done through an endorsement or rider to the policy, both of which are legally binding amendments to the original contract. For example, an inflation rider on a title insurance policy adjusts your insurance coverage amount to reflect the increase in your homes property value over time. Its important to read all endorsements and riders your insurance company sends you to know exactly how your coverage has changed.
Get Help Protecting Your Insurance Rights
If youve been paying your premiums, you expect your insurance to come through for you when you need it most. Unfortunately, some insurance companies will try to deny coverage based on confusing terms in the insurance policy. If your insurer has denied your claim or seems to be acting in bad faith, contact an experience, local insurance attorney who can explain your policy and help defend your insurance rights.