Understanding Insurance Policies

Insurance policies are used to hedge against the risk of financial losses, both big and small, resulting from damage to the insured or their property or liability for damage or injury caused to a third party. Unfortunately, many purchase a policy without understanding what is covered, the exclusions that take away coverage, and the conditions that must be met for the coverage to apply when a loss occurs.  


This article aims 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 by understanding your insurance policy. 


What Is An Insurance Policy? 

An insurance policy is a legal contract between the insurance company (the insurer) and the person(s), business, or entity being insured (the insured). It lays out what’s covered, what isn’t, and other details of your agreement, so it helps you verify that the policy meets your needs and that you understand your responsibilities and that of the insurance company if a loss occurs.  


The Basics of an Insurance Contract 

These forms state the coverage term, the insurance policy limits, the grant of coverage, exclusions and other limitations of coverage, and the duties and responsibilities of the insured in 

the event of a loss.  


The Declaration Page 

This page is usually the first part of an insurance policy, also known as the information page. It identifies the name of the insured, their address, what risks or property are covered, the policy limits, the policy period (i.e., time the policy is in force), and other essential information that varies from policy to policy. 


The Insuring Agreement 

This is that portion of the insurance policy in which the insurer promises to make payment to or on behalf of the insured under the contract terms. It is usually contained in a coverage form from which a policy is constructed, often outlining a broad scope of coverage, narrowed by exclusions and definitions. In the Insuring Agreement, the insurer agrees to do certain things such as paying losses for covered perils, providing certain services, or agreeing to defend the insured in a liability lawsuit. 


The Exclusions 

These provisions in policy will fix the limits on the promises of coverage stated in the insuring agreements. These provisions serve one or more purposes, including elimination for coverage of (1) coverage for losses caused by specific perils, (2) coverage provided by other insurance, (3) coverage of uninsurable losses. Exclusions are those portions of the insurance contract which limit the scope of the coverage and/or list the causes and conditions which are not covered


The Conditions  

Conditions are provisions inserted in the policy that qualify or place limitations on the insurer’s promise to pay or perform. If the policy conditions are not met, the insurer can deny the claim. Insurance policy conditions are important because they address a wide variety of issues, including if or how other insurance contributes, how and when the insured must give notice of a claim, the insured’s duties after a loss or occurrence, the insurer’s subrogation, and other rights, and what happens in cases of fraud or misrepresentation by the insured. 


To obtain a copy of your insurance policy, please contact your insurance agent or company. If you are still looking into getting an insurance policy, London Insurance is here to assist you!