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UNDERSTANDING YOUR INSURANCE POLICY
An insurance policy is a legal contract between the insurance company (the insurer) and the person(s), business, or entity being insured (the insured). Reading your policy helps you verify that the policy meets your needs and that you understand your and the insurance company's responsibilities if a loss occurs. Many insureds purchase a policy without understanding what is covered, the exclusions that take away coverage, and the conditions that must be met in order for coverage to apply when a loss occurs. With this being National Hurricane Preparedness Week, the National Association of Insurance Commissioners (NAIC) would like to remind consumers that reading and understanding your policy can help you avoid problems and disagreements with your insurance company in the event of a loss.
The Basics of an Insurance Contract
There are four basic parts to an insurance contract:
It is important to understand that multi-peril policies may have specific exclusions and conditions for each type of coverage, such as collision coverage, medical payment coverage, liability coverage, etc. You will need to make sure that you read the language for the specific coverage that applies to your loss.
Typical examples of excluded perils under a homeowners policy are flood, earthquake, and nuclear radiation. A typical example of an excluded loss under an automobile policy is damage due to wear and tear. Examples of excluded property under a homeowners policy are personal property such as an automobile, a pet, or an airplane.
Most policies have a Definitions section, which defines specific terms used in the policy. It may be a stand-alone section or part of another section. In order to understand the terms used in the policy, it is important to read this section.
Endorsements and Riders
An insurer may change the language or coverage of a policy at the time of the policy renewal.Endorsements and Riders are written provisions that add to, delete, or modify the provisions in the original insurance contract. In most states, the insurer is required to send you a copy of the changes to your policy. It is important that you read all Endorsements or Riders so you understand how your policy has changed and if the policy is still adequate to meet your needs.
Obtaining a Copy of Your Policy
To obtain a copy of your insurance policy, you should contact your insurance company or your agent/sales representative.
Get More Information
Contact your state insurance department if you have questions regarding your policy or if you are having difficulty obtaining a copy of your policy from your insurance company. You may link to your state insurance department's Web site by visiting www.naic.org. Click on NAIC States & Jurisdictions to find your state insurOriginal Source: http://www.naic.org/documents/consumer_alert_understanding_your_ins_policy.htm