How to read an insurance policy
Whether you have purchased home, auto, or another type of insurance, it's helpful to read through your official general policy documents as soon as you receive them so you know the terms and conditions of your coverage. The overview section of your declarations page should be your first destination as it gives you the highlights of your policy and its coverages.
How to read your insurance coverage
We’ll take you step-by-step on how to read insurance coverages so you can better understand your policy:
Read the overview on your declarations page
You can find an overview of your policy on the declarations page(s) at the very beginning of your policy packet. Consider this insurance policy section to be your cheat sheet for looking up your policy number, coverage period, coverage types, limits, deductibles, premium, and agent's contact information (if applicable), all in one place. You can also access this information online in your policy documents section.
Learn insurance terminology
As you're reading your insurance policies, you'll come across terms and phrases you may or may not recognize. Additionally, many everyday words take on legal meaning in the world of insurance. Flip to the definitions section for an auto glossary or property glossary of the bolded or italicized words in the policy. It's helpful to look up definitions as they appear so you can closely review each definition in context.
Train your eagle eye and read the fine print
Reading insurance policy documents takes time, patience, and focus. It's natural to want to skim over it, but you can gain a better understanding of your policy if you give it your full attention from start to finish. Remember, an insurance policy is a contract between you and your insurer. And, because there are many types of auto insurance and types of home insurance out there, making sure you understand what’s available to you and what you currently have can help you choose coverages as your circumstances change throughout life.
Ask yourself questions
It's one thing to read your policy and another to understand it fully. After you've gone through the entire insurance contract, test your retention by asking yourself the following questions:
- Do I know where to find my policy number and general policy information?
- When does my policy expire?
- Do I have an insuring agreement for each coverage that I purchased?
- What are my deductibles?
- What are my coverage limits?
- What are some of the exclusions to my coverage?
See what’s covered (your insuring agreement)
While the declarations page gives a useful summary, you probably want to know what your policy covers and your policy limits in more detail. Look to the insuring agreement section for a statement of the coverage provided and be aware that each type of coverage will have its own agreement. If you purchase an auto policy with liability insurance, comprehensive, collision, and other auto coverages, there will be a separate insuring agreement for each coverage.
See what’s not covered (your exclusions)
Insuring agreements are usually brief, concise, and “pursuant to the terms of the policy.” That last part alludes to the other provisions, which will include exclusions to your coverage. Reading the exclusions will help you follow the rules of your policy. There may be one or several exclusion sections in a policy, as well as exceptions to exclusions. Exclusions could also be scattered throughout the policy as line items. If you see sections containing the words “conditions,” “limitations,” or “provisions,” these will also determine what your policy doesn’t cover.
You can also give both your coverage and your understanding of it a gut-check by asking yourself, "If X happens, will I be covered?"
Not sure? Ask your insurance company or agent
Each insurance policy is unique, and different types of insurance have different terminology. Home insurance, for example, will list the types of perils covered, whereas life insurance centers on a "death benefit" or "face amount" paid to the beneficiary when the insured dies.
There's a lot to read and learn. Take your time, jot down any questions, and contact the agent listed on your declarations page to ask away. You can also email your agent if you’re reviewing your policy documents online. Remember, any time you make changes or renew your insurance, you should receive and review updated documents. Policy documents can contain errors, too, so don't hesitate to bring items to your insurer or agent's attention.