What goes into an insurance policy? Unless you’re in the insurance industry, you’ve probably never read through an entire policy. In fact, most people don’t know more than their basic coverage levels.
It’s not essential to understand every line of your policy. In most cases, your trusted broker will be able to handle questions or claims as they come up. However, it can benefit you to know a few basics beyond how much you’re covered for; in particular, it helps you make sure you aren’t doing anything that unknowingly impacts your coverage.
Let’s start with the very basics and get a little more in-depth as we go:
WHAT IS AN INSURANCE POLICY?
An insurance policy is essentially a contract between two parties: you (the insured) and your insurance company (the insurer). The contract explains what your insurance covers, what the insurer pays in case of an accident, and what your obligations are. This last part is important; most people don’t realize they have responsibilities when it comes to maintaining their policy and coverage.
WHAT GOES INTO AN INSURANCE POLICY?
Insurance policies typically include five key sections:
- Declarations
- Insuring Agreements
- Definitions
- Exclusions
- Conditions
Declarations
The first page of your policy is the declarations page. This is basically a condensed summary of the entire policy. The information here will usually include:
- The type of coverage
- The “Named Insured” (the specific individual or company covered)
- The duration of the policy
- The rates
- The limits of coverage and associated deductibles
This section will give you the basic rundown of your policy.
Insuring Agreement
Your insuring agreement tells you the situations that you’re covered in. This section gives you a broad overview of what your policy covers.
Some policies have very specific coverage. For example, a medical insurance policy may provide coverage for specific types of medical conditions, but not others. Remember, for your insurance claim to be valid, your condition or situation needs to be included in the insuring agreement and not listed in the exclusions (see below).
Definitions
You might be familiar with a word and its meaning, but that doesn’t mean you should skip over the definitions page! When it comes to insurance details, the interpretation of specific words can greatly impact your coverage.
These words will be defined very carefully so you can fully understand your coverage. For example, a policy might define a “family member” as a child, grandchild, sibling, or parent. While you have other family members, these are the only people considered family members in the case of your policy.
Exclusions
This section is fairly self-explanatory. The exclusions section tells you what’s excluded (what is not covered) by your insurance policy. If you read this through and notice something is excluded from your policy, take note because you won’t receive any coverage for it. If you don’t understand why something is excluded, call your insurance broker to learn why.
Conditions
These are the requirements you (the insured) have to meet to be covered by the policy. This is one of the most important sections in your insurance policy, so make sure you read closely. If you don’t meet these conditions, you might not be covered in the event of a claim.
ARE ALL INSURANCE POLICIES THE SAME?
Specific policies may include additional sections, but these five cover the basics. Now that you understand a bit more about your insurance policy, try reading it through and making a few notes. Then get in touch with your local insurance broker with any questions that come up.
If you’re struggling to understand your insurance policy, get in touch with the brokers at Cornerstone Insurance. Our insurance brokers are ready to help you understand your policy and make sure you have the right type of coverage for your needs. Even if you aren’t with us, we’d love to review your policy with you!
