Your insurance policy documents are the nuts and bolts of your coverage. They contain important information about your policy, such as its terms and conditions. However, they can be hard to understand if you’re not familiar with the multiple parts of it. To help you understand the policy, here are the five parts of insurance policies.
The Declarations Page is often referred to as the “dec page.” It summarizes all of the critical details of your insurance policy, and it’s the first part you’ll encounter. All policies should include:
- Type of coverage
- The policy period, number, and premium
- Assets and names of the people covered
- The limits on coverages and your deductibles.
- Endorsements included in the policy
- Any discounts that have been applied to the policy
The “Definitions” section provides a broad definition of common words, as well as narrows their meaning to avoid the ambiguity that could affect the insurer’s liability in court. It also includes special formatting such as boldface font, italics, and quotes to help you interpret these words. Although these are not always available for interpretation, they should still be carefully reviewed for coverage exclusions and changes.
The insuring agreement is typically the central part of a policy, and it explains what the insurer will do and how it will pay for certain types of claims. For instance, if you have a car insurance policy that provides coverage for bodily injury, you might see an Insuring Agreement that says, “this is about your coverage.” Each of the coverage sections could have its own agreement.
Exclusions and Limitations
The exclusions section is typically the same as the Insuring Agreements, explaining what policies are excluded from coverage. For instance, a homeowners insurance policy might exclude certain types of damage, such as earthquakes and floods. Auto policies might also provide a section that allows them to provide exceptions to their exclusions.
The Declarations Page also provides a list of policy limits that are included in the “Limitations of liability.” These limit the amount of money the insurer will pay for specific claims. For instance, a home insurance policy might provide a limit of $500,000 for reconstruction after a claim.
The Conditions section also provides a list of policy provisions designed to help the insurance company pay or perform its obligations. These include specific requirements you must meet for the company to pay or perform its obligations. One of these is protecting your property from further damage after a claim, for example, by allowing the insurer to inspect a damaged claim before it can start repairs. Other conditions include loss reporting and settlement, subrogation rights, and cancellation and nonrenewal.
One of the most important factors you should consider when buying insurance is the terms of your contract. This will help you feel that your policy is covered in the event of a loss. It’s also important to make sure that you understand the various aspects of the policy so that you can easily make informed decisions. Having a good understanding of the multiple sections of the insurance policy can help you make informed decisions.