That being said, I am a staunch advocate for reading your policy. There are several reasons, but the most important of these is that an insurance policy is your protection thus it makes little sense to go into battle without knowing what you have in your war chest to defend yourself.
So…in an effort to help you take inventory of your weapons, I thought it would be helpful to offer some layman’s terms that you are actually understandable to the non-legalese speaking people out there.
First, let’s paint the big picture. An insurance policy is a contract between you and the insurance company. Think of the POLICY as a whole as the body. Just as in the human body there are there are systems within the policy that provide a function.
The foundation of the body is the skeletal system providing the basic structure. In the insurance contract you would liken this system to the INSURING AGREEMENT. In this section of the policy you will find the foundational structure of the contractual agreement between you and the insurance company. This structure is made up of the coverages provided as well as limits for each coverage.
The coverages and limits found in the insuring agreement are listed DECLARATIONS PAGES. Think of the declarations pages like an x-ray of the skeletal system. It provides a snap shot of what is in the insuring agreement.
Building on the foundation of the skeletal system in the body is the muscular system. This system adds strength and support to the frame underneath it. Similarly, in the insurance contract you will find ENDORSEMENTS, ADDITIONAL COVERAGES, and COVERAGE ENHANCEMENTS. These elements support the coverages found in the insuring agreement to propel coverage forward much like the skeletal and muscular systems work together in the body. You will find these in a variety of places throughout the policy. Sometimes they are part of the insuring agreement, however they can also be enumerated in endorsements.
Another major system in the body is the digestive system. This system breaks down your food and processes food for absorption. In the insurance contract this is the EXCLUSIONS/LIMITATIONS section. The terms in this section break down, erode, or limit coverages. Again, you can find these as part of the insuring agreement and/or as endorsements attached to the policy.
The nervous system is the part of the body that allows for the function of other systems. In the policy this would equate to the CONDITIONS/WARRANTIES portion. In order for your policy to function as intended you often have to comply with conditions or warranties of coverage. Most of these are common sense requirements, however not knowing and complying with them can void your coverage. Again, you can find these as part of the insuring agreement and/or as endorsements (free radicals) floating throughout the policy.
Next we move on to the immune system which is responsible for DEFENSE in the body. This function is mirrored in the insurance contract. In some contracts this is part of the insuring agreement, in others it may be defined by several separate endorsements. As with the body, there are two pathways to defense in insurance contracts. It can be an internal defense (like the immune system) providing coverage from inside the limits or it may be external defense (like antibacterial soap, gloves, and other external precautions) providing coverage from outside the limits. The key thing to know here is that defense inside the limit erodes the limit available to pay claims, while defense outside the limit does not as it is in addition to the limit of liability.
Rounding out the body is the circulatory system. This system transports blood throughout the body which gives life to other systems. In the insurance contract this is comparable to the CAUSES OF LOSS/PERILS INSURED AGAINST section. In order for the other systems to work a loss/claim must give life to the policy. This section defines which claims/losses the insurance policy will respond to.
Finally, we get to the endocrine system which is responsible for creating and sending hormones that control bodily functions. Referencing the insurance policy, this would be the DEFINITIONS section. This part of the policy stipulates the starting point for coverage interpretation. The language and terms used in the contract have specific definitions and meanings intended by the insurance company, thus it becomes imperative to delineate the purpose of using such language.
Of course there are many features and other nuances imbedded in each contract that can be just as important to know, however with this type of cursory knowledge you now have a better understanding of the meat and bones that make up you protection.
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