How to Read an Insurance Policy

Insurance policies are made up of several parts:

Declarations identify:

• Who is insured
• What risks are covered (listing of coverages included)
• Policy limits (limits of liability, deductibles purchased)
• The amount of premium
• Effective dates of coverage
• Others having an interest in the policy
• A list of form numbers and endorsements, which add to or alter that policy
• The name of the insurance company.
  

The Insuring Agreements section states:

• What losses are covered
• The subject matter of the insurance and description of the property covered
• The perils insured against - Circumstances under which the insured may receive the proceeds of the insurance
• Exclusions that eliminate specific hazards (i.e., what it does not insure). In order for a claim to be valid it must be covered under the insuring agreement and must not be stated as an exclusion.

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Policy Conditions are requirements the insured must fulfill to maintain coverage:

• If the insured breaches a condition, the policy may be void or voidable or the insurer may refuse a claim arising out of the breach.
• If the insurer breaches a condition, the insured may be compensated for losses that occurred as a result of the breach. The degree of compensation depends on individual circumstances and the policy wording.