An insurance policy is a legal contract between the insured—you or the entity being insured—and the insurer, therefore it is important for you to understand policy basics. Reading your policy helps you verify that the policy meets your needs and that you understand all parties’ responsibilities if a loss occurs. Here is an outline of the six main parts of every insurance policy:
- Declarations Page
The declarations page is usually the first part of an insurance policy. It identifies who is an insured, what risks or property are covered, the policy limits, and the policy period (e.g., time the policy is in force).
- Insuring Agreements
The insuring agreement summarizes the major promises of the insurance company and states what is covered.
- Exclusions
The next section you’ll typically encounter will name exclusions. Exclusions take coverage away from the insuring agreement.
- Conditions
The 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
- Definitions
Most policies have a “definitions” section, which defines specific terms used in the policy
- Endorsements and Riders
An insurer may change the language or coverage of a policy at the time of the policy renewal. Endorsements and riders are written provisions that add to, delete or modify the provisions in the original insurance contract.
