Most people never read their entire insurance policy because it makes for dull and tedious reading. Typically, policyholders pull out their policy and scan the policy for specific provisions when an issue arises. The problem with this approach is that by the time policyholders attempt to analyze their policy and understand its terms, conditions and exceptions, it might be too late. Insurance is designed to be forward looking to provide security against potential future perils rather than merely reactive once a catastrophe occurs.
Since homeowners do not have experience interpreting insurance policy language, this blog provides some general rules for reviewing an insurance policy.
- Determine the individual(s) or entity identified as the policyholder
- Review the insuring agreement
- Carefully read the exclusions and note any that are a concern
- Study exceptions to the exclusions
- Ensure that you have all endorsements and other parts of the policy
- Make sure you understand the definitions of key terms in the policy
- Annotate the policy with notes as you conduct your review
- Verify that the policy limits are sufficient
- Review any cross-referenced section while you are reviewing the referenced section
- Note key terms and phrases
- Confirm you have satisfied all conditions (if making a claim)
With these basic tips in mind, the initial step in the process of understanding your insurance policy is to obtain the policy in its entirety. While this might seem too obvious to mention, the process of obtaining the policy can be easier said than done. Sometimes portions of the policy might be misplaced, or the copy of the policy in your possession might not be the version that is in effect on the relevant date. The best practice is to analyze a “certified copy” of the policy. This refers to a version of your policy that the insurance company assembles and swears is complete and in effect at the time a loss occurs.
Policyholders should also understand the basic structure of an insurance policy. Insurance policies have four basic components: (1) insuring agreements, (2) declarations, (3) exclusions and (4) conditions.
Insuring Agreements & Exclusions: This insuring agreements portion of the policy (along with exclusions) constitutes the primary substantive terms of the policy. The language of the insuring agreement sets forth what is covered under the policy. While the exclusions are technically a separate component of the policy, they limit the scope and range of coverage that is spelled out in the insuring agreement. Because the function of insurance is to provide coverage for loss, the insuring agreement generally is to be interpreted broadly while exclusions are interpreted narrowly.
Declarations: While much of the policy will be standard language included in all policies, this is the portion of the policy that is expressly customized for an individual policyholder. This portion of the policy will provide the following basic information:
- Name of the insured
- Policy limits
- Property and risks for which coverage applies
- Effective policy dates
- Legal name of the insurance company (necessary to prepare a lawsuit)
Conditions: This portion of the policy sets forth requirements that the policyholder must fulfill to obtain coverage. If you must pursue a claim, this portion of the policy must be reviewed carefully because it can be a trap for the unwary. The policy might require an insured to satisfy all conditions under the policy prior to filing a lawsuit. An experienced attorney can guide you through these potential obstacles and roadblocks.
If you have questions about your insurance coverage because your insurer refuses to process your claim in a timely fashion, my law firm might be able to help. We represent policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.