How to Read an Insurance Policy

Before this happens, it's important to understand what your insurance actually covers.

An insurance policy is a contract that specifically outlines the terms of insurance coverage, including policy limits, deductibles, covered losses, exclusions and endorsements that alter the policy. In order to get the most protection from your insurance, it's imperative to know exactly what the policy says. Being educated about your insurance coverage will save you time, money and frustration in the event of a loss.

Instructions

1. Review the Declaration Page, which is typically the first page of the policy. This is a summary of the policy, and includes the coverage period, named insured(s), addresses covered (for property or homeowners insurance), vehicles covered (for auto policies), deductibles, and total premium due for the entire policy period. Information on the Declarations Page should be checked for accuracy. If you find errors, notify the insurance company or your agent immediately to make corrections.

2. Read the Insuring Agreement section to learn exactly what is promised by the insurance company. Named Perils agreements cover only perils specifically listed while All Risk agreements cover any peril that is not excluded from coverage. The Insuring Agreement also lists services that may be provided, such as legal defense in lawsuits and payment for covered losses.

3. Examine the Exclusions section thoroughly to learn what is not covered under your policy. This section lists all, losses, perils or causes of loss and properties that are not covered. For example, life insurance companies may cover accidental causes of death, but go on to exclude death by suicide or death caused by partaking in high-risk activities such as car racing. Educating yourself about what is excluded from coverage will help you assess your behaviors and take precautions to protect yourself and your property to avoid uncovered losses.

4. Review the Conditions section thoroughly to determine what actions you must take in order to meet the requirements for loss claims to be paid. If you do not adhere to the conditions of your specific policy, the insurance company can refuse to pay a claim, even if it is listed as a covered loss. Conditions include protecting property after a loss has occurred, filing proof of loss, making timely claims and cooperating with the insurance company's investigation of a loss.

5. Review any endorsements that may be attached to the policy, upon issuance or as they arrive during the policy period. Endorsements issued by the insurer modify coverages or forms in some way and can affect your level of protection. Endorsements are also issued if you wish to add or delete coverages during the policy period. These types of endorsements will list the effective date of coverage (for the endorsed item), the item added or deleted, and any further terms and conditions that apply to that particular situation.

Tips & Warnings

• If you are confused about what is and is not covered, make a list of questions and contact your agent for clarification.

• Document every step when a loss occurs. Take photographs, keep copies of claims forms, and keep record of all calls to law enforcement, your insurance agent and insurance company claims repreresentatives.

References

• NAIC Consumer Alert: Understanding Your Insurance Policy
• Money Smart Life: Insurance Policies 101 -- Understanding Insurance Policies and Claims
• Nationwide: Understanding Your Insurance Policy

Resources

• NAIC.org: Consumer Resources