A few weeks ago Ed Poll of LawBiz Management interviewed me on insurance issues faced by lawy firms. Listen to the podcast here.
Hints For Reading Your Insurance Policies
The mere thought of reading an insurance policy can make your head hurt. Here are some hints to make it less painful.
Start with an Understanding of the Purpose of the Policy
An auto policy is designed to cover vehicle accidents. General liability insurance is purchased to protect the insured from liability arising out of bodily injury, property damage, personal injury, and advertising injury. Directors' and officers' insurance indemnifies the key people for errors in judgment and bad decisions. Professional liability is designed to pay for poor advice and doing your work improperly.
Read the Declarations Page
The declarations page is usually the first few pages of the policy. It will have information specific to the policy being reviewed, such as: policy effective and cancellation dates; name of insured; the subject of the insurance policy (list of vehicles, buildings, description of property, etc.); premiums charged; policy form numbers and edition dates.
Review the Definitions
In most insurance policies, words that are defined by the policy are in bold type or are within quotation marks. Find the definition section of the policy and browse the terms.
Read the Insuring Agreement
The insuring agreement is usually the first part of the actual policy wording. It will tell you what is covered by the policy. For property insurance, learn what causes of loss (perils) are insured. For a directors' and officers' insurance policy, look at the definition of "wrongful act."
Review the Exclusions
Exclusions tell you what is not covered by the policy. Most policies start with broad insuring agreements, then whittle away at the coverage with the use of exclusions. Broad exclusions are not necessarily bad. For example, a general liability policy will exclude auto accidents. No problem. That's why you buy an auto insurance policy.
While reviewing exclusions, look for exceptions to the exclusion. Look for wording like, "This exclusion does not apply to..." For example, the general liability policy excludes watercraft. There is an exception to the exclusion in most policies for watercraft less than 26 feet in length that you do not own.
Review the Endorsements
The endorsements are usually found at the end of the policy. They amend the standard policy language. It is not unusual to have more than ten endorsements to the policy. The title of the endorsement usually gives you a good idea of what is trying to be accomplished with the form. If an endorsement deletes a section of the policy, mark that section in the policy document for future reference.
Review Policy Conditions
The policy conditions will show you the general "rules of the road" for the contract. Issues like cancellation, arbitration, and claims reporting are usually covered in this section.
Read the Policy With A Pencil
I read insurance policies with a pencil in hand. I mark sections and summarize the contents of a particular clause in two or three words. It helps me find sections later and makes sure that I am not wasting time looking at a section that is amended by an exclusion.
Start with an Understanding of the Purpose of the Policy
An auto policy is designed to cover vehicle accidents. General liability insurance is purchased to protect the insured from liability arising out of bodily injury, property damage, personal injury, and advertising injury. Directors' and officers' insurance indemnifies the key people for errors in judgment and bad decisions. Professional liability is designed to pay for poor advice and doing your work improperly.
Read the Declarations Page
The declarations page is usually the first few pages of the policy. It will have information specific to the policy being reviewed, such as: policy effective and cancellation dates; name of insured; the subject of the insurance policy (list of vehicles, buildings, description of property, etc.); premiums charged; policy form numbers and edition dates.
Review the Definitions
In most insurance policies, words that are defined by the policy are in bold type or are within quotation marks. Find the definition section of the policy and browse the terms.
Read the Insuring Agreement
The insuring agreement is usually the first part of the actual policy wording. It will tell you what is covered by the policy. For property insurance, learn what causes of loss (perils) are insured. For a directors' and officers' insurance policy, look at the definition of "wrongful act."
Review the Exclusions
Exclusions tell you what is not covered by the policy. Most policies start with broad insuring agreements, then whittle away at the coverage with the use of exclusions. Broad exclusions are not necessarily bad. For example, a general liability policy will exclude auto accidents. No problem. That's why you buy an auto insurance policy.
While reviewing exclusions, look for exceptions to the exclusion. Look for wording like, "This exclusion does not apply to..." For example, the general liability policy excludes watercraft. There is an exception to the exclusion in most policies for watercraft less than 26 feet in length that you do not own.
Review the Endorsements
The endorsements are usually found at the end of the policy. They amend the standard policy language. It is not unusual to have more than ten endorsements to the policy. The title of the endorsement usually gives you a good idea of what is trying to be accomplished with the form. If an endorsement deletes a section of the policy, mark that section in the policy document for future reference.
Review Policy Conditions
The policy conditions will show you the general "rules of the road" for the contract. Issues like cancellation, arbitration, and claims reporting are usually covered in this section.
Read the Policy With A Pencil
I read insurance policies with a pencil in hand. I mark sections and summarize the contents of a particular clause in two or three words. It helps me find sections later and makes sure that I am not wasting time looking at a section that is amended by an exclusion.
Subscribe to:
Posts (Atom)
