Almost every commercial insurance policy consists of the same basic components.
The declarations pages (often called “dec” pages for short) usually comes first. These pages list who is insured, for what time period, and for how much. Sometimes deductibles or self-insured retentions are also denoted herein.
Next comes the base coverage form. The base coverage form begins with insuring agreements that tell you what your commercial insurance provider has agreed to cover.
The next section will tell you what the insurer specifically excludes from coverage. Not surprisingly, the insuring agreement is usually a short paragraph or two and the exclusion section is pages long.
Following the exclusions comes medical payments and supplementary coverages, which are nice little extras your insurer provides that are most often (but not always) in addition to and do not affect your policy’s other limits of insurance.
Another important section that follows is the policy definitions. As you read your policy, you will notice words that are capitalized, bolded, italicized, or some combination thereof. Each of those words is specifically defined by the policy, and the definition given in the policy may differ widely from the dictionary definition you would expect for that same word.
It is important to note that a commercial insurance company can restrict or exclude coverage in large measure by simply changing a definition, and do not have to disclose that said change in the definition restricts or excludes certain claims unless you specifically ask.
This is often how denied claims occur because the only parties aware of the new restrictions/exclusions are the folks at your commercial insurance company who drafted the new forms and definitions. The underwriters issuing the policies are often clueless, and most often not allowed to offer their interpretation of policy language anyway so asking them is not helpful.
As an aside, if you hear or read the words, “clarifying intent” from your commercial insurance company or agent you can rest assured you have new exclusions. Clarifying intent sounds nicer, but it means the same thing as exclusion in the insurance industry.
The other remaining section is the terms and conditions that detail your responsibilities and your insurers responsibilities, cancellation procedures, etc.
It is important to note those terms and be sure you find them acceptable before binding coverage.
I have saved the best for last…….the endorsement section. This is where your insurer changes what they wrote in the base policy form.
There are usually 20 or more pages worth of endorsements and most frequently these forms offer new or broader exclusions. Occasionally they will afford some new and/or extra coverage.
In order to understand how these changes affect your coverage, you have to find what was changed in the base policy form and insert the new language there. After you have done so, reread the policy section with the new language.
Compare what was originally written to what is now in its place, and you will know how much further your coverage has been restricted or excluded.
Assuming you purchase more than one line of insurance for your business, you’ll need to read each of your policies carefully and be sure there are no gaps between the lines of coverage.
If you have multiple insurers, you will want to be certain there is no conflict of interest where the insurers could get into a finger-pointing competition and neither of them ends up paying a claim (which means you get to pay it out of pocket.)
Understanding insurance is not difficult, but it is tedious. While it is tedious, it is also extremely important because failing to understand what you are buying works in everyone’s favor but yours.
Other parties will get paid regardless of whether your claims are covered or denied. It is your responsibility to be certain you know what you are doing and that your business is properly covered.
Confused? Don’t have time to read and sort through a thousand pages of legalese? I will be happy to answer any questions you have.
To Your Success,