The Basics of Insurance Policies

Most people are unaware most insurance policies are different. An auto insurance policy is different from a life insurance policy and a life insurance policy will be different from a long-term care or disability policy. While this can be confusing for someone interested in purchasing multiple insurance policies, the good news is that all of them share a few common items. Once you understand what they are you should be able to comprehend your insurance policy, no matter what type of insurance it is.

Always keep in mind to prevent a lost life insurance policy, keep it in a safe place where your loved ones and family members can locate it. Registering on a central life insurance database is something everyone with insurance should consider.
The first thing to understand is that an insurance policy is a written contract, an agreement, between the insured (you) and the insurance agency. Every policy has an insuring clause which is, basically, a generalized statement of what coverage the insurance company is responsible for. If you pay the premiums and make sure you keep to the conditions within the policy wording, the insurance company agrees to make payment to you (and/or beneficiaries) in the instance of a loss. Essentially it means any financial risk is deflected from you and transferred to the insurance company.
Every policy is also sectioned off, with each section defining the policy terms, types of coverage, the rights and responsibilities of both parties, any exclusions or limitations and any other types of optional coverage you have selected. The first page usually begins with a summary of the agreement between the insurance company and you (the insured). This Declarations Page gives the information about who is covered, what’s covered, the applicable dates for coverage and the amount of any premiums. It will also have the policy number listed, your name and address, and the name and address of the insurance agent. It can also have other important information such as coverage limits.
There should also be several provisions in your policy. These describe the policy features and types of benefits you would expect in the event of a loss. The policy will also explain any necessary requirements and the rights and responsibilities for each party. Other provisions in the contract may be required by law, either state or federal. These provisions are required and designed to protect you. There will also be a section, or sections, for any exclusions denying or precluding coverage depending on the circumstances.
If you had the option of choosing any other options when you applied for the insurance policy, there will also be a section for these, explaining what they are and any related information. This can be information about dividend options (if you have a cash value life insurance policy) or any optional auto coverage for an auto plan (such as additional bodily injury coverage).
If you are paying additional premium for any riders, there will be sections regarding the additional rider coverage – any coverage considered above and beyond the basic contract. If there are any endorsements or amendments added to the standard contract, the insurance company may add that information as well, be it at time of issue or thereafter.
Remember, your insurance policy is a legal contract. If you don’t understand any portion of the wording or provisions, it is best to get help from your insurance agent first. Make sure they explain everything to your satisfaction and understanding before signing.
Until next time,
Michael Hartmann
Tweeter: @FindurPolicy
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