How to Read a Property Insurance Policy?
Insurance policies do not invite casual reading. Consequently, many people fail to thoroughly examine their policies until a loss occurs, only to find that they had misunderstood the terms of the agreement. You can avoid such problems by systematically reading a policy before you purchase it, focusing on eight points:
Perils covered: Some policies list only the perils that are covered; others cover all perils except those listed. The definition of certain perils may differ from that used in everyday language.
Property covered: Like perils, the property covered under a policy may be listed individually, or only the excluded property may be listed. When the property is listed individually, any new acquisitions must be added to the policy.
Types of losses covered: Three types of property losses can occur: (a) the loss of the property itself, (b) extra expenses that may arise because the property is rendered unusable for a period of time, and (c) loss of income if the property was used in the insured’s work.
People covered: Insurance policies may cover only certain individuals. This information usually appears on the first page of the policy but may be changed subsequently in later sections.
Locations covered: Where the loss occurs may have a bearing on whether it will be covered. It is especially important to know which locations are not covered.
Time period of coverage: Policies are generally written to cover specific time periods. Restrictions may exclude coverage during specific times of the day or certain days of the week or year.
Loss control requirements: Insurance policies often stipulate that certain loss control efforts must be maintained by the insured. For example, coverage for a vehicle may be denied if the owner knowingly allows it to be driven by an unlicensed person.
Amount of coverage: All insurance policies specify the maximum amount the insurer will pay for various types of losses.
The information on these eight points may be spread throughout a policy. In fact, coverage that appears to be provided in one location actually may be denied elsewhere. Carefully review the entire policy to determine the protection it provides. If necessary, telephone the salesperson or company to obtain clarification.