How to read an insurance 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 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.

See what's covered

While the declarations page gives a useful summary, you probably want to know what your policy covers 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, comprehensive, collision, and other auto coverages, there will be a separate insuring agreement for each coverage.

See what's not covered

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.

Learn insurance terminology

As you're reading your policy, 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 a 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

Reading an insurance policy 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.

Ask yourself questions

It's one thing to read your policy and another to understand it fully. After you've gone through the entire policy, 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?

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?"

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. 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.