There is not a trick to understanding an insurance policy. There is, however, a way to go through a policy that will make it easier to understand.
The good news is that most insurance companies will stick to standardized terms and definitions. It makes it much easier to compare coverage. Also, a good portion of every policy is boilerplate material. If your new policy looks similar to your old one, it’s no coincidence. That doesn’t mean you shouldn’t review the information, though. It does, however, call out just how important it is to go through the endorsements section.
Review endorsements and riders. There is a difference between an endorsement (insurance) and a rider (surety bond), but agents and others have been known to use the terms interchangeably. The general effect of both an endorsement and a rider is to change the terms of the boilerplate policy.
It is possible to negotiate the terms of an insurance policy. If you want to clarify the definition of “other structures” to include your tree house or a child’s playhouse, for example, that would go on the endorsement. If you want to increase or to reduce coverage, that would go on the endorsement page.
Likewise, if your insurance company modifies the language or the coverage in the boilerplate policy, you will receive an “amendatory endorsement” that explains the change. For example, say your policy does not cover damage to your pool during a windstorm. Halfway through the year, the Florida Legislature passes a law that requires homeowners insurance companies to cover damage to pools. The insurer will send you an amendatory endorsement with your renewal notice, explaining the change and providing substitute language for the original policy.
Now what? This series of posts has been focused on risk management. These are all good steps to take when you receive your new policy or your renewed policy so you understand the implications of not putting a fence around your new above-ground pool. And, of course, understanding your coverage will help you if you have a claim.
If your claim is denied, though, or if you have trouble getting a claim paid, your knowledge of the policy is not quite as useful. Those are the times when you pick up the phone to call an attorney.
Source: Insurance Journal, “ Any Insurance Policy: 12 Rules,” Christopher J. Boggs, Jan. 5, 2015Share