Be Informed: Why Do You Need to Read Your Insurance Policy?

February 21, 2017

Read through your insurance policy and understand its terms.

There’s no denying that insurance claims can be denied. Per the Department of Labor, at least one out of seven claims under employer health plans is initially denied. That results in 200 million claims denied every year.

While it is ultimately the insurer’s decision to deny or approve claims, it will certainly help that you understand your insurance policy. So when it’s time to file a claim, you’ll be more confident that your loss will be covered – the very reason why you obtained an insurance, right?

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Getting to Know Your Insurance Policy

It’s ideal to go over each item on your insurance policy before affixing your signature and thereby agreeing to what is stated on paper.
The moment you sign the document, you become bound by its terms and conditions especially when filing and collecting claims. So, how do you break down your insurance contract and get past the technicalities?

According to the National Association of Insurance Commissioners, an insurance policy has four basic parts:

(1) Declaration Page, (2) Insuring Agreement, (3) Exclusions, and (4) Conditions.

Declaration Page

Also known as Declarations Page/DEC Page/DEC, it is the front page of your insurance policy. Here you’ll find: (i) the name of the insured, (ii) the address of the insured, (iii) the policy period, (iv) the type of coverage, (v) the policy limits, and (vi) other pertinent info applicable.

You see, the DEC page is a summary of your insurance contract. How much is your coverage limit, for instance, helps you determine the extent of how much you can claim.

Insuring Agreement

It is a recital of the insurer’s promise to make payment to or on behalf of the insured. This promise is hinged on the insured’s obligation to pay premiums.

More importantly, the Insuring Agreement briefly discusses the main conditions underlying the insurance coverage.

If it’s named-perils coverage, that means the insurer will only cover losses that are listed specifically in the policy. If the policy is an all-risk coverage, the insurer will cover all losses except those that are specifically excluded.

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This section narrows down the scope of the insurance contract.

Exclusions are risks, perils, or causes of losses that the insurer will not be covering. These exclusions are important to take note of because you can’t file claims for them.

For instance, a homeowners insurance policy generally has these exclusions: nuclear hazard, war, owner’s neglect, intentional loss, power failure, earth movement, ordinance or law, and water damage.

Not all exclusions can be found under this section; some of them may be in the definitions, conditions, endorsements, and the insuring agreement no matter how briefly discussed.


This section sets forth the terms, conditions and limitations of the insurance policy.

It sets forth the insurer’s policies, rules and provisions on (i) your duties and obligations to pay your premiums, (ii) cancellation of the policy, and (iii) assignment of the contract, among other things.

The importance of reading this part can’t be emphasized enough: failing to meet the policy’s conditions can mean denial of your claim.

We’ve come full circle. Essentially, just read everything so you won’t miss out anything important from the definitions to the attachments, if any, to your policy.

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