An insurance policy is a legal contract between the insurance company (the insurer) and the person(s), business, or entity being insured (the insured). Reading your policy helps you verify that the policy meets your needs and that you understand your and the insurance company’s responsibilities if a loss occurs. Many insureds purchase a policy without understanding what is covered, the exclusions that take away coverage, and the conditions that must be met in order for coverage to apply when a loss occurs. The SCDOI would like to remind consumers that reading and understanding your entire policy can help you avoid problems and disagreements with your insurance company in the event of a loss.
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the basics of an insurance contract
There are four basic parts to an insurance contract:
Reading: What is an insurance contract called
- declaration page
- insurance contract
- specific peril coverage, under which only perils specifically listed in the policy are covered. if the hazard is not listed, it is not covered.
- all-risk coverage, by virtue of which all claims are covered except those specifically excluded. if the loss is not excluded, then it is covered. life insurance policies are usually comprehensive policies.
- excluded perils or causes of loss
- losses excluded
- excluded property
It is important to understand that multi-peril policies may have specific exclusions and conditions for each type of coverage, such as collision coverage, medical payments coverage, liability coverage, etc. you’ll need to be sure to read the language of the specific coverage that applies to your loss.
the declaration page
This page is usually the first part of an insurance policy. identifies who the insured is, what risks or assets are covered, the policy limits, and the policy period (i.e., how long the policy is in effect).
For example, the declarations page of an automobile policy will include the description of the covered vehicle (for example, make/model, serial number), the name of the covered person, the amount of the premium, and the deductible ( the amount you will pay). has to pay for a claim before an insurer pays its share of a covered claim).
Similarly, the declarations page of a life insurance policy will include the name of the person insured and the face amount of the life insurance policy (for example, $25,000, $50,000, etc.).
the insurance contract
This is a summary of the main promises of the insurance company and states what is covered. In the insurance contract, the insurer agrees to do certain things, such as pay losses for covered risks, provide certain services, or agree to defend the insured in a liability claim. There are two basic forms of an insurance contract:
exclusions remove coverage from the insurance contract. The three main types of exclusions are:
Typical examples of risks excluded under a homeowners policy are floods, earthquakes, and nuclear radiation. A typical example of a loss excluded under an automobile policy is damage due to wear and tear. Examples of property excluded under a homeowners policy are personal property such as a car, a pet, or an airplane.
Conditions are provisions inserted in the policy that qualify or impose limitations on the insurer’s promise of payment or performance. If the conditions of the policy are not met, the insurer may deny the claim. Common conditions in a policy include the requirement to present proof of loss to the company, to protect property after a loss, and to cooperate during the company’s investigation or defense of a liability claim.
Most policies have a definitions section, which defines the specific terms used in the policy. it can be a stand-alone section or part of another section. To understand the terms used in the policy, it is important to read this section.
supports and attachments
An insurer may change the language or coverage of a policy at the time of policy renewal. endorsements and riders are written provisions that add, remove, or modify provisions of the original insurance contract. In most states, the insurer must send you a copy of the changes to your policy. It is important that you read all endorsements or riders to understand how your policy has changed and if it is still appropriate to meet your needs.
Do you want to review your policy?
To obtain a copy of your insurance policy, contact your insurance agent or company.