Do you read your insurance policy? Not many people do, as they rely on their insurance brokers or agents to do the “dirty work” for them. Generally, this is not a good practice to follow when purchasing insurance, and is equivalent to purchasing a car without knowing the mileage, year and past mechanical issues of the vehicle. Remember: your insurance policies are a contract, and it is imperative to know what exactly you are covered for and if the policy responds to the needs that led you to purchase insurance for in the first place.
While reading your insurance policy can be difficult, so much so that more than half of the states in the US have enacted “readability” laws for insurance policies, it is a task that must be done to make sure you are getting what you paid for. Most policies have a Schedule of Forms and Endorsements page and follow the D.I.C.E model, which stands for Declarations, Insuring agreement, Conditions and Exclusions. Once you understand the functions of each of these sections, you will be well on your way to understanding your policy and making sure you know what you are covered for.
Schedule of Forms and Endorsements Page
This page is like a table of contents for your policy, except instead of it giving the page number the form will be found on, it simply gives you the form number that is included in your policy. This page lists the forms that are included and made a part of your policy. Think of it as an abstract summary of your policy.
If you don’t read any other section in your insurance policy, at the very least you want to read this. In some ways the Declaration Page summarizes your policy. It includes important information, such as your address and contact information, and the information of your carrier and broker, but most importantly it is explains what is insured, for how long and up to what limits. It is incredibly important to review this page, and if anything is incorrect, bring it to the attention of your carrier or broker immediately.
This section begins the nitty-gritty details of your policy. It states what the insurance company is agrees to pay, up to what limits and details when the occurrence must have happened for the insurer to pay. You will find multiple insurance agreements within the same policy, each applying to a different type of coverage. For example, for a Commercial General Liability policy you may see COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY, followed by insuring agreement and exclusions, COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY followed by insuring agreement and exclusions and COVERAGE C MEDICAL PAYMENTS, followed by insuring agreement and exclusions. It is in this section that the “legal banter” begins, so you may have to read the section a couple of times before it is fully understood.
The conditions section of your policy will be its own form and will discuss circumstances that will be applied to the entire policy. The following are examples of certain conditions that may or may not apply to your own policy:
The proper steps to take to cancel the policy by either the insured or the insurer
How changes can be made to the policy
Inspections and Surveys the insurance company has a right to do
It is important to abide by these conditions as failure to do so can lead to a denial of a claim.
You can find the exclusions right after the insuring agreement. While this section is written in legal terms, it is important to understand what events and circumstances are not covered in your policy. It is especially important to understand this because you may need insurance for something that is excluded, and therefore will need to purchase an endorsement.
Ultimately, you want to try to read your policy over two or three times to get the basic gist of what is covered and what is not. You owe to yourself and the security of what is being insured to understand your policy. If you can’t understand it after a couple of tries, give your agent or broker a call and to get an official answer.