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.
