If you are like most people, there is a good chance that you have never actually read your insurance policy, at least not all of it.
In fact, many people are surprised when they hear that their insurance policy can be upwards of 100 pages long!
This idea of people not reading their insurance policy is so well known, even Nationwide has joked about it in a commercial:
However, don’t be alarmed, because the chances are that even if you did read your policy, you probably won’t be able to understand most of it. Knowing how to read an insurance policy can be tricky, but don’t worry, it’s not your fault.
The following is an excerpt from the book When Words Collide by Bill Wilson, CPCU, ARM, AIM, AAM:
“Readability can be measured by the Flesch Readability Scale which uses a point system based on the length and complexity of sentence structure to rate written documents… the higher the score, the easier to read. In on study reported in the March 1967 issue of the Journal of Risk and Insurance, a Bible scored 66.97 while Einstein’s Theory of Special Relativity scored only 17.72. Sadly, a personal automobile policy scored just 10.31.”
Yes, that means an insurance policy can be harder to read than Einstein’s Theory of Special Relativity. Yikes! The following is a very basic breakdown of what constitutes most insurance policies.
First is the Declarations Pages. This section will contain who the insurance carrier is, who the “insureds” are (that’s you!) and the policy limits. The limits indicate the dollar amount that the property, and your personal belongings, are insured for.
These pages will also list all of the forms that make up your policy. Most people will have multiple forms that make up the policy. It may look something like this:
After the Declarations, come your actual policy forms. Often these forms will start with any of the required amendments by State Law. Following these amendments or endorsements is typically the main coverages form. Here, you will find the definitions for many of the terms used throughout the policy, as well as an explanation of the basic coverages and exclusions in your policy.
This portion of your policy is broken into two parts, Section I and II. Section I comprises of coverages for your dwelling (home), contents (personal property), and personal property not located at your home. This section will discuss what is covered and what is excluded from coverage for each of the above three areas.
Section II encompasses the “Liability” portion of the Policy. Here, you will find what your policy provides in the event that someone is injured on your property.
Optional Coverages or Endorsement Section
Finally, you’ll find the optional coverages or endorsement section of the policy. Although typically located at the end of your policy, this section is extremely important because it can – and often does – alter the coverages explained above. These are things like endorsements to cover sump pump overflows, sewer back-up, or any specialty coverage you may have.
This is a very basic breakdown of what your insurance policy contains, however, it is very important that you read the whole policy and understand what coverages you do – or do not – have before presenting a claim to your carrier. If, after taking a look at your policy, you still have questions, get in touch with us and we’d be happy to help!