How to Read an Insurance Policy

It is a very rare person who reads an insurance policy from beginning to end for fun. Even insurance agents don’t read polices word by word.

Most of us only read the language in our insurance policies when we are looking for an answer to a specific question. But once you learn how to an insurance policy for key points, you can be sure you have the coverage you need — and if you don’t, you will at least know the right questions to ask your agent to get the insurance you need at a price you can afford.

Make sure all of the information on the declarations page is correct.

The declarations page lists your name and address, who and what is insured, and your monthly premiums. The declarations page will also identify the most you can expect from your insurance policy before exceptions and exclusions are applied.

Make sure your policy covers who and what you expect it to cover.

Errors in listing who and what are insured by a policy are rare but they occasionally happen. Life insurance policies bought on line may list the person whose life is insured as the beneficiary who receives the payout from the policy, and vice versa. Owners of vacation homes who rent them out through management companies may find their policies protect the management company and don’t protect them.

These kinds of errors are uncommon, but they invalidate a policy. Read the “insured” line of your policy first.

Make sure you have the entire policy.

Sometimes consumers pay premiums for riders that add coverage not otherwise included in a standard policy, like an earthquake rider on a homeowner policy. Sometimes policies include exclusions but also exceptions to the exclusions that protect the policyholder.

Riders, exclusions, and exceptions to your policy are listed on the Declarations Page. If they are not attached to your policy, however, they won’t be enforced and you may only discover the omission of these documents when your claim is denied.

When your policy refers to another section, read that section before you continue.

Insurance policies aren’t written for easy reading. When you see a reference to another part of the policy, read that part of the policy before you read any farther. It’s the only way not to get lost in details.

Pay attention to “and” and “or.”

“And” is inclusive. “Or” is exclusive. Skipping over these important conjunctions can lead to a complete misunderstanding of your coverage.

Don’t assume a term means what you think it means.

Terms like “replacement value,” “bodily injury,” “totaled,” and even “deductible” don’t usually mean what consumers think they mean. It’s always a good idea to communicate with your insurance agent to make sure that you understand what your insurance companies or the legal system mean by important terms in your policy. Insurance companies sometimes have to use terms with counterintuitive meanings because the courts have defined them that way.

When you need insurance information fast, these rules will help you at least to ask the right questions of your insurance agent. Never hesitate to share your  lingering concerns about your coverage with your insurance agent.