There was a total of $1.22 trillion worth of insurance policies written in the US in 2018.
If you’re an adult human, chances are you’ve paid to insure something in the last year. However, how much of the policy you bought did you really understand?
Read on as we look at how to read insurance policy documents in-depth and cultivate an understanding of some of their more complex terms.
How to Read Insurance Policy Documents
Like all legal documents, insurance policy statements are very wordy. They contain a lot of technical language and are full of provisions that will probably never apply to you.
However, buried within this text are some vital pieces of information. You need to learn how to find this information quickly, without having to sift through a mountain of incomprehensible jargon first.
The Key Parts of an Insurance Policy Document
To learn how to read an insurance policy document properly, you first need to learn about the main parts of it. The following are the main areas of insurance policy documents.
Declarations
Declarations are included to identify all the basic details of the insurance policy.
For instance, there will be declarations in relation to the name and address of the insured and the insurer, the amount of the premium, the cover granted by the policy, and the period during which cover is available.
Declarations are typically completed by an insured person when they fill out their policy application. They will be printed close to the start of the policy document.
Definitions
Any terms that are central to the policy document will be clearly defined at the beginning of the document. This means that the writer of the document will not have to explain these terms each time they are used.
Insuring Agreement
This is a detailed statement of all the risks that are covered by an insurance policy.
This part of the document is critical, as it shows policyholders what they can expect to claim money for. If the incident that leads to a loss isn’t mentioned here, it is unlikely to be the subject of a successful claim.
It may also contain guidance as to how quickly you may expect payment where a claim is accepted.
When you receive your policy document, this is one of the areas you should review very carefully.
Conditions
This is any term of the insurance contract which is fundamental enough to void the agreement if breached.
For instance, your honesty about your lifestyle habits would be a condition of a health insurance contract.
Consider an example of a heavy smoker who takes out health insurance, but tells the provider that he is a nonsmoker. If he develops a respiratory illness, it is likely that the provider will be able to refuse his claim.
In more serious cases, a situation like the above might even be considered insurance fraud.
Building a Better Understanding of Insurance
Knowing how to read an insurance policy documents may not be the most exciting life skill you ever learn. However, it’s an important one. Knowing about the various industry terms will help you to understand your insurance needs, and how to limit costs going forward.
If your business has been impacted by a natural disaster, CSG can help. Contact us today to arrange an appraisal of the damage done and the likely costs to undo it.
