We insure our motor vehicles, our businesses, our homes, our apartments, our condos, our jewelry, our boats, our RVs, and our lives. Do we really read and understand the insurance policies that we purchase? Or, do we just rely upon our insurance agents and brokers to find the best insurance product to suit our needs at the most reasonable price?
This article will try to enlighten you and navigate you through the maze of insurance language within an insurance policy.
I will use a general liability business insurance policy as an example.
The most logical place to begin is acquainting you with the Declaration Page (Dec Sheet). Every type of insurance policy written has a Dec Sheet. This is a page that gives you a wealth of information such as:
- the name of the insurance company
- the name and address of the insurance agent or broker
- the type of insurance policy that is written
- the insurance policy number
- the name(s) of the insured(s) with their addresses
- the insurance policy period from inception to expiration
- the insurance policy limits; and
- the amount of the annual insurance policy premium for each coverage risk.
In general, there are two types of insurance policy coverages in a motor vehicle or homeowners or business policy.
There is “first party coverage” and “third party coverage.”
“First party insurance coverage” can be defined as insurance coverage that insures the named insureds for their own losses. An example of such coverage is when someone experiences a fire or flood to their home and files a claim with their insurance company for the value of destroyed property.
“Third party insurance coverage” can be defined as insurance coverage that insures the named insured for losses that they cause to third parties.
An example of this coverage is when you are operating your vehicle and you strike the rear of the vehicle in front of you which causes physical damage to that vehicle and personal injuries to the driver. That driver now makes a claim against you for both sets of damage. This is called a “third party claim” and your insurance policy protects you for this claim.
Insurance policies can be confusing and complex as they are written by experts in the insurance industry. We, as policyholders, have no “say” in the policy language. Therefore, we must rely upon our insurance agents and brokers and our attorneys to interpret and explain their language.
Most insurance policies contain, in the beginning of the policy, language that gives you the insurance coverage that protects you. Following this language, is the insurance language that excludes or limits this insurance coverage. This language is found within the policy and in “endorsements” which are appended to the policy.
Your insurance policy also tells you what you have to do in the event that you file a “first party claim” or if a “third party claim” is filed against you and there are certain time requirements of which you should be aware.
In the event that your insurance company, for some reason, denies you insurance coverage, your policy also tells you how you must proceed, whether with an appeal, arbitration or litigation.
Another form of insurance coverage that you can purchase is “excess coverage” also known as an “umbrella policy.”
Such an insurance policy is usually written for $1 million increments and insures you on top of your primary limits. For example, if you own an automobile and you have a $300,000 liability insurance policy limit for “third party claims,” a $1 million “excess policy” will add that coverage to any such claims so now you would have $1.3 million in insurance coverage to insure that claim. However, be aware that all such excess insurance policies require minimum coverages for the primary policies and to protect yourself, you must maintain those primary limits.
Should you have an questions about your personal or business insurance portfolio, please ask your broker or agent, or give me a call.