Let me start by saying this post is not meant for everyone who reads our blog. We have very sophisticated insurance professionals and interested people who do not need a primer on how to read an insurance policy. However, based on the number of times I hear “What does my policy cover? Why are my responsibilities when I make a claim? What are the basic exclusions?” – I thought it would be useful to give a very rudimentary overview of how to read a homeowners insurance policy as a homeowner.
I have attached PDF sections of a basic policy with the pertinent sections highlighted. In the attached policy, Section 1 concerns a damage or loss to your physical property and Section 2 concerns liability coverages. For purposes of this blog, I am concentrating on the coverage under Section 1 relating to physical property.
1. Get an accurate copy of the policy.
Always demand a certified copy of the policy from the carrier. This certification means that the policy is put together by the carrier and sworn as accurate as of the date of loss. Florida Statutes, Section 627.4137 mandates that the carrier must provide a copy of the policy upon request.
2. Breakdown of the Policy sections
Most policies have four basic parts: declarations, conditions, perils insured against, and exclusions.
Declarations – This identifies who is insured, what risks or property are covered, policy limits, and the effective dates of coverage. It also contains the identity of the insurance company along with a list of form numbers and endorsements.
To ensure that you have an accurate and complete copy of the policy, compare the form numbers and endorsements listed on the declarations page with the pages of the policy. You can also find edition dates on the form numbers. Compare those edition dates on the form numbers to the dates on the actual policy pages to ensure they match. Likewise, compare the edition dates on the form numbers on the declarations page and policy pages to the effective dates of the policy. Obviously, if the edition dates on the form numbers and policy pages are after the date of loss, you likely have an inaccurate copy of the policy.
Conditions – Conditions are the requirements that the insured must satisfy to achieve coverage. They are sometimes labeled "Conditions Applicable to Entire Policy," or "General Conditions." You might also find conditions within each coverage part. This is a VERY important section as failure to satisfy these conditions can lead to the denial of an otherwise valid claim. The Conditions section may also contain things that the carrier must do in the event of a claim. In this particular policy, 2 separate Conditions sections were applicable because one section applied to the section concerning property coverage and one section applied to the entire policy.
Conditions can limit the time to bring suit, require recorded statements by the insured and their representatives, set forth the procedure for submitting a Sworn Statement in Proof of Loss, etc. Definitions can also appear in the conditions section, but may also show up in conditions applicable to specific coverages.
Perils Insured Against and Exclusions – This section states what is covered; exclusions take coverage away.
I tried to make this as easy as possible but reading an insurance policy is inherently difficult. Hopefully, you will take the time to read your policy before something happens, using this as a guide.