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We know that everyone is always banging on about reading through the Terms and Conditions before signing a contract. But the reality is most of us don’t, because the T&Cs are boring, and honestly, the print is just too small! But when it comes to your insurance, you’ll want to change your tune: understanding all the terms and conditions is essential when purchasing any insurance policy.
An insurance policy is more than a legal contract between the insurer and the policyholder. It also explains exactly what you, the policyholder, should expect and are entitled to. Reading through a policy thoroughly will help you determine whether it meets your coverage requirements, offers ample benefits, and is financially affordable.
You must, must, must (!!) make sure that you understand your responsibilities and the company’s role, particularly in the event you need to make a claim. This is absolutely critical because this is why you have insurance in the first place: in case something bad happens and you need to make a claim! Consumers often purchase a policy with only a minimal understanding of what is covered and what isn’t, which both keeps them from leveraging the benefits and can prove financially (or legally) ruinous in the event of a loss.
While every provider (and every policy) comes with a different contract, most insurance policies include info about the type of plan, policy term, benefits, and premium details. Of course, the order and substance depends upon both the provider and the policy.
So let’s dive into the various sections of an insurance policy to help you understand what you can skim, and what you need to close-read.
While the actual content of an insurance policy depends upon the coverage type, most policies contain the following:
You'll want to make sure you read and understand the policy thoroughly so you’re prepared in the event of a loss, but also so that you know what exactly you’re paying for!
In your insurance policy, the first page is usually the declaration page, which outlines who is insured, what risks are covered, what factors affect the amount of coverage and annuity, and what the policy limits are. The declaration page also covers information about the policy premiums, dates, coverage provided, and coverage limits.
The declaration page of a homeowner insurance policy, for example, will include the description of the property along with its location, the names of the person(s) covered, the insurance premiums amount, insurance coverage benefits, grace period, and the deductibles.
Based on the type of insurance policy, this page may also include information on the lump sum amount, interest rates, insurance time period (number of years), assigned rating classifications, and any special property covered, such as construction equipment, digital art, antiques, or other assets.
In the case of variable universal life insurance, the declaration page often includes details of the policy’s cash value, flexible premiums, additional premium payable, waiver of premium, cash surrender value during a terminal illness, investment variety, and more.
This section of the insurance policy summarizes what the insurance company has agreed to pay, assuming that the premiums are paid on a timely basis. This is where you’ll find information on what is covered and how the company will pay the loss for covered perils (aka an event that can cause damage or loss).
But let’s dive into that second part about what the company will pay for! There are two types of insurance agreements: named-perils coverage and all-risk coverage. Named-peril coverage lists specific perils that the policy covers. The perils that are not listed are not covered.
All-risks coverage automatically covers all the risks that the insurance policy does not explicitly omit. That means if the loss is not excluded in the contract, then the policy covers it. Remember that, as ever, each policy is going to be different, which is why it’s important to read yours closely!
The exclusions page lists the legal conditions under which the insurer will not pay for claims, even for the risks and events covered by the policy. To put it bluntly, the exclusions section tells what is not covered in your insurance policy. There are three main types of exclusions:
Excluded perils under a homeowners policy, for example, typically include extreme weather conditions such as earthquakes or floods; in an auto insurance policy, on the other hand, the standard exclusion is damage due to wear and tear. Again, the types of exclusions depend on the type of policy: life insurance will be different from health insurance or RV insurance.
Before you purchase a new policy, you should ask your insurance agent to talk you through the exclusions; that way, if you have questions, you can get the answers you need before buying.
Conditions are certain provisions mentioned in the insurance policy that dictate the insurer’s liability to pay or perform in the event of a loss. This section details what conditions must be met to ensure coverage remains intact.
Remember that insurance is a service: you pay and the insurer (in theory) provides. But if you don’t hold up your end of the deal, the insurer can refuse to pay your claim. What exactly those conditions are depends upon the type of policy. As you might expect, a health plan has different conditions than auto insurance or a group life insurance policy.
And a quick note that conditions can either expand or restrict the scope of the policy coverage. For example, your coverage may be expanded if you choose to take on a higher premium.
This section also includes information on your premium payments, and the responsibilities of both the insurance provider and the insured person during a claim settlement. Things like: the insured party will be required to file a proof of a loss, the insured must cooperate during a claim investigation — that sort of thing. Here too is where all the nitty-gritty details of a policy are spelled out.
After listing the conditions, you’ll then find the endorsements page, where you can see any modifications to the policy terms. An endorsement can restrict or exclude claims from prior and pending litigation, and it may also contain revised definitions of terms used in the policy document.
We know how important it is to read the fine print, we really do. We also know how busy you are, and so while it is very important to read your policy front to back (soup-to-nuts style), you can also start by jumping right to the benefits, since that’s often the starting point in any insurance decision.
Benefits are often found on the declaration page alongside the provided coverage. Read them through and do not assume anything. If something isn’t clear, contact your insurance agent. It’s totally normal to be confused by insurance jargon, and it’s in your best interest to triple check you understand what’s covered!
Because it can be tricky to parse, let’s take a closer look at where you can find benefits in life insurance, as an example. In term life insurance policies, the first section usually includes the information discussed during the application underwriting process. The declaration page contains information about the death benefit that the life insurance company will pay upon the insured's death. It may also include details on insurance riders, if there are any. Both the death benefits and exclusions sections should be read carefully since these will detail the reasons and circumstances that can limit or invalidate the death benefit in case of accidental death.
Are you looking to buy a new insurance policy but aren't sure where to start? Don’t worry, we've got you. Marble’s insurance comparison tool can help you compare the benefits of different insurance policies, so that you can purchase the best policy for your needs and budget. Join Marble today to get better benefits and earn rewards on your next insurance purchase.
