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Is there a trick to understanding an insurance policy?

We often urge people to read their insurance policies. It may not be a laugh a minute; it may not be an edge-of-the-seat thriller. You may even doze off once or twice. But your insurance policy -- and it doesn't matter what kind of insurance we are talking about -- contains information that could change the way you run your house, the people you lend your car to, or the insurance company you buy your coverage from.

It occurs to us, however, that we could offer some guidance about what to look for. Insurance Journal obliged by providing a Cliff's Notes outline of items you should be familiar with on every policy. And, no, there will not be a quiz. From us, at least.

Who, exactly, is insured? The first page of an insurance policy, the declaration or "dec" page, lists basic information about the policy. The dec page lists the following:

  • Name, address and contact information of the agent that sold the policy
  • Name, address and contact information for the named insured
  • Description of what the insurance covers.
  • Effective and expiration dates for the policy.
  • Policy limits.

What you need to remember here is that the named insured is not necessarily the only person covered by the policy. Family members or other full-time residents of your home could be covered by your homeowners policy. Anyone you lend your car to could be covered by your auto insurance policy. Turn to the "Definitions" section toward the front of the policy. Under the entry for "Insured" you will find a list of all the people who are and aren't covered.

What does the insuring agreement say?We're going to leave this for our next post.

We do want to remind everyone that an insurance policy is not a rare illuminated manuscript or a delicate, one-of-a-kind scrap of parchment that must be kept hermetically sealed in a climate-controlled room. It's a form. There are more just like it. And you would do well to write notes in the margins or highlight particularly important items as you read through it.

Source: Insurance Journal, "How to Read Any Insurance Policy: 12 Rules," Christopher J. Boggs, Jan. 5, 2015

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