Understanding the nitty-gritty of your insurance policy in 6 steps

Yep, trudging through the entirety of your home, auto, or life insurance policy is probably not exactly your idea of a good time. Big words, stuffy language, long sentences…oodles of fun, right? Oh, yeah. Insurance policies. Good stuff.

As daunting as the task may seem, reading through your policy is actually very important when it comes to making sure that you have the coverage you need for your family. Your policy spells out the agreement between you (the insured) and your insurance company (the insurer) and explains who’s responsible for what if you’re faced with a catastrophe.

Whether it’s your home insurance policy or your auto insurance policy, you need to make sure that you know what’s going on in that very important legal document. You never know when it’s going to come in handy. To help you out with that little bit of homework, we’ll take a piece-by-piece look at each section of your insurance policy so that you’re in the know when it comes to your insurance.

1. To kick things off, we have the DECLARATIONS PAGE.

The declarations page (or dec page for short) is the first section of your policy. It’s kind of like a prologue, in a way. Pretty much it gives a high-level view of your policy and what your policy does. It’ll tell you:

  • Who’s insured.
  • What’s covered—the perils and property that are included.
  • The policy period—when the policy is effective.

If you’re looking at your auto policy declarations page, it’ll probably include the make, model, and VIN of the insured car, your name (or the name of the insured) and the premium and deductible. Basically, it’s a summary of who’s insured and for how much.

2. And now for the INSURING AGREEMENT.

The insuring agreement goes over what the insurance company has promised to do in the event of a loss. It also explains what is covered. Basically, the insurance company has promised to do certain things, such as paying for covered losses or agreeing to defend you if you’re faced with a liability lawsuit. This is the section where they tell you what they’ll do for you.

It's important that you know what your policy does and does not cover.

There are two different types of insuring agreements.

The first is named-perils coverage, where only the things that are expressly written out are covered.

The second is all-risk coverage, in which all losses are covered except for the losses that are expressly excluded. If the loss isn’t named as being excluded, it’s covered. Life insurance policies are typically written out in all-risk format.

3. And here’s the not-so-fun part…The EXCLUSIONS section.

Okay, this is the part that gets tricky, so you want to pay special attention to it. The exclusions section spells out things that are NOT covered in your policy. That means that if one of those things happens to you, your insurance will not help you to cover the costs.

There are three different types of exclusions:

  • Excluded perils: A peril is basically the cause of the loss. There are certain perils that won’t be covered in a typical insurance policy. For example, flooding is usually not covered. You may also have to add extra coverage for earthquakes, as earthquakes usually aren’t covered, either. 
  • Excluded losses: Excluded losses are things that might cost you money to repair but aren’t covered in your policy. Wear and tear on a car, for instance, is usually an excluded loss.
  • Excluded property: These are things that you own or have but aren’t covered under your policy. An example would be your pet or private jet.

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4. And, to carry on, there’s the CONDITIONS section.

This is somewhat related to the idea of exclusions. The conditions section explains the circumstances in which the insurance company might not have to pay out on a claim—yes, there are times that an insurance company might not have to pay. If the conditions of your policy are not fulfilled, that’s not good. It means the insurance company has grounds to say that they’re not responsible for covering expenses.

Make sure you know what conditions your policy outlines.

An example of a condition might be protecting your property after a loss. Let’s say you’re trying to figure out what to do after a tree falls through your roof.  You know you have to file a claim, but your policy might say that you have to protect the property to prevent any further damage. If you neglect to do that, the insurance company might not accept the claim. You don’t want that to happen, so make sure that you understand the conditions and your responsibilities as the insured to make sure that a claim doesn’t get denied.

Other examples of conditions that you might have to fulfill are filing a proof of loss and cooperating with an investigation during a liability lawsuit.

5. And to make sure we’re all on the same page (pun intended) there’s the DEFINITIONS section.

Okay, a little trick about the definitions section. It might be a section all by itself, or it might be tucked away into another section. You might have to look for it a bit, or your insurance policy might not have one.

That disclaimer said, the purpose of the definitions section is to go over terms that might be used in your policy. Insurance has its own jargon that can sound like gobbledegook if you’re not familiar with it. The definitions section is to help you understand what’s being said in all that gibberish.

6. To finish things off, we have the ENDORSEMENTS AND RIDERS section.

Endorsements and riders are “extras” that are written into your policy. They can take away coverages, add coverages, or change coverages. Basically, this is the section where any additional coverages are tacked onto your policy.

When your policy is renewed every year, the language or coverage can be adjusted by the insurer, so it’s important to make sure to go through this section to make sure that everyone’s still on the same page.

Phew! That’s a lot of insurance. Hopefully that helps explain how your policy is broken down. There’s a lot of useful information that you need to know that’s written in all of those pages of insurance-speak, but knowing where to find what you’re looking for might be helpful.

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And of course, we can help answer the questions you might have about your specific policy. If you’re looking to get a free insurance quote, look no further! We can help you with your quest. Just fill out our quick and easy quote form or call us today and we can aid you on your insurance mission, whatever that mission may be – auto insurance, home insurance, or renters insurance.