|
|
|
|
How to Read an Insurance Policy
Author: aditi
Remember Hurricane Katrina? In addition to the physical
devastation and loss of lives, it resulted in an
insurance nightmare for many business owners and
homeowners, because their insurance policies did not
cover damages caused by hurricanes, tornadoes, etc. As a
lawyer, I read a lot of insurance policies. Hurricane
Katrina is an extreme example, but it illustrates a
scenario I see all the time in my practice: many people
do not realize until it is too late that their insurance
policies are inadequate or unequipped to shield them
from financial losses or other damages.
Almost every adult owns some type of insurance policy.
Vehicle, homeowner, medical, directors & officers
liability, commercial property, professional liability
and travel insurance are but some examples. Other than
having a general understanding of the type of coverage
we have and the coverage amounts (and, of course, the
premium amount), many of us don’t know how to read and
understand our policies and grasp how they work in the
event that we need to rely on them.
The following is some basic information that will assist
you if you are a policy owner or if you are
contemplating purchasing insurance.
1. What documents constitute an insurance policy?
Usually, when you take out insurance, your insurance
company will provide you with an insurance certificate
or “declarations” page. This lists the items insured,
and the amounts. The declarations may also refer to
certain policy “exclusions.” However, as a policy owner
you really should be asking the insurer for a copy of
the complete policy, and any policy booklet that they
may issue as a companion interpretive guide. In the
event that you need to rely on your policy, the
Declaration document is not helpful. Furthermore,
reviewing the entire policy gives you an opportunity to
understand or identify any “gaps” in coverage – i.e.
matters that are not covered by your insurance and for
which you may want to consider obtaining extra coverage
through another insurance company.
2. Do you know what your policy “limits” are, and are
they sufficient?
The amount of insurance coverage you obtain is called
your insurance limits. If you own a vehicle, you will
have purchased liability insurance with limits of
$500,000, $1,000,000 or $2,000,000, this means that if
someone sues you as a result of a car accident, your
insurance policy will respond to that lawsuit to the
extent of the limits you have purchased. These limits
are sufficient for most people, however, did you know
that if you are injured in a car accident and you sue
the at-fault driver who only has limits of $500,000, yet
your damages far exceed that amount, and then there is a
clause in your policy that will allow you to access your
own policy for the shortfall? If the liability limits in
your motor vehicle insurance policy is $1,000,000, then
there may be an extra $500,000 available to you. That is
where having an understanding of the importance of the
limits of your policy will assist you when you are
making the decision to purchase insurance.
It is important to discuss with your broker all of the
possible circumstances that may result in you having to
access your insurance policy. This discussion will
dictate the amount of insurance coverage you ultimately
decide to purchase. If you do not purchase insurance
with sufficient limits, then, in the case of liability
insurance for example, if you are sued for an amount
that exceeds the limits of your policy, you will
personally be on the hook for the balance – which means
that your assets and income may be vulnerable to
garnishment. In the case of property insurance, you will
have to personally pay for any damages that are not
covered by your policy – if these damages are excessive
or exorbitant, the financial consequences may be
disastrous.
3. What are “Exclusions”?
In my experience, it’s the exclusion clauses that leave
policyholders vulnerable and most policyholders do not
read them. I draw your attention once again to Hurricane
Katrina. Exclusion clauses identify the events or
circumstances that will result in there being no
coverage under the policy. For example, residential and
commercial property insurance policies may contain an
exclusion for theft caused when the premises remains
unlocked or unoccupied. Do you run a business out of
your home? If so, most homeowner’s policies will not
cover any damages caused by or a result of commercial
activities. Many professional liability policies contain
exclusions for damages caused by fraud or dishonest
conduct. If you own a large commercial building, your
property insurance may contain exclusion for certain
types of boiler and furnace mishaps (i.e. those caused
by wear and tear, for example). And most travel
insurance policies exclude health care coverage for
illnesses causally related to pre-existing or prior
medical conditions, even where those conditions have
been dormant for some time.
The insurance company and broker have a duty to draw all
policy exclusions to your attention. Many insurers
accomplish this task by sending you a letter at the
outset of the policy period, advising you to review the
exclusion section of the policy. Some insurers do not do
this. Regardless, in order to protect yourself, when you
take out your policy, ask the insurer and your broker
(if you are dealing with one) to identify all the policy
exclusions. The exclusion clauses are often densely
worded and convoluted. Therefore, if you do not
understand them, you must point advise your insurer and
ask for an explanation. If you think one of the
exclusions may even potentially affect you in the
future, you should speak to your broker about obtaining
additional coverage for the excluded item from another
insurance company, or, you may ask the insurer if you
can purchase an enhanced form of coverage. For example,
if you own a lakefront cottage and are worried about the
potential for water leakage into the basement, review
your policy carefully to ensure that this type of water
damage is covered, if it is not covered, you will want
to purchase supplemental coverage.
4. Policy Conditions
Policy conditions are pre-requisites to coverage. They
are events or conditions that are necessary to keep the
insurance in place. Payment of the premium by a certain
date is a simple example. Another is maintaining a
security alarm as a pre-condition to insurance against
losses caused by theft. Other conditions relate to the
policyholder’s obligations once a claim arises – that
is, the reporting requirements. The reporting
requirements dictate when and how you should report a
claim to your insurance company. Some policies require
that you report the claim in writing and within a
certain period of time. In some policies, coverage will
be triggered by notifying the insurer by phone – as many
of you who have been in car accidents know.
There is almost always a time limit within which you can
report a claim. Some insurance policies spell this out
explicitly in the policy, others simply say that notice
to the insurers must be given after an incident
“forthwith” or “immediately.” Regardless of the wording
used, if you suspect that you have a claim that may be
covered by your policy, you should report it.
Policy conditions should be regarded in the same manner
as exclusions, since failure to abide by them will
result in a lack of coverage. Therefore, it is important
that you have a complete understanding of what they are
when you purchase your policy.
5. Insurer’s Obligations When a Claim Arises
Insurers have a duty to deal with you in good faith.
When you make a claim under your policy, your insurer
has a duty to assist you in processing your claim, to
act in your best interests and to not take an
unreasonable position on coverage. If the insurer makes
a coverage decision that has no basis in the policy,
then it may be subject to a complaint to the Financial
Services Commission of Ontario, or in a lawsuit it may
be vulnerable to a claim for punitive or aggravated
damages.
6. The Role of the Broker
I have previously written on this site about the role
and obligations of your insurance broker. Having an
understanding of how your policy works and your policy
exclusions allows you to have a meaningful discussion
with your broker about what your insurance needs really
are. Some of the additional questions that may arise out
of this discussion, and which may result in your
decision to purchase additional or enhanced insurance,
are listed below.
Do you own property outside of Ontario or conduct any
business activities outside of Ontario?
Do you conduct any business activities in your own home?
Are you a voluntary or paid officer or director of a
corporation? Are you aware that you may be sued in this
capacity and that insurance may be available to protect
you in this instance?
Does your workplace medical-dental policy provide
sufficient coverage for all possible health-care
contingencies?
Do you travel regularly outside of Ontario and/or
internationally? Are you over the age of 65 and travel
regularly?
Article Source: http://www.articlesbase.com/insurance-articles/how-to-read-an-insurance-policy-414039.html
About the Author:hi, My nane is aditi and i am woring as
a content writer in data comp web technologies....i am
fond of reading books and like to read and write good
articles....i want to be a part of articlesbase.
|
|
========================================================================== |
|
Online Insurance Quotes
Author: Gary Tallon Obtaining
insurance quotes offline is a real drag. You can spend
hours on the telephone repeating your details to life
insurance or household insurance telesales operators in
a bid to find the lowest quotes available...
read
»» |
|
========================================================================== |
|
Auto Insurance Costs News
Author: Eden Ali Everyone who would
like to have deals with a good auto insurance company
need to get to know as much as possible about it. One of
the craterous could be the question: what the auto
insurance company does to reduce insurance cost...
read
»» |
|
========================================================================== |
Life Insurance Guide and Glossary
Author: Christina Costa
Life insurance has a vocabulary all its own. Some
insurance terms might sound familiar, but have a
different meaning when used in the life insurance world...read
»» |
|
========================================================================== |
New York Health Insurance
Author: Maria
New York Health Insurance
Health insurance is insurance that pays for all or part
of a person's health care bills. A health insurance
policy is an annually renewable contract between an
insurance company and an individual... read
»» |
|
========================================================================== |
|
|
|
|
|
