If you live in a rented house or apartment, having renter’s insurance to protect against property loss, damage, or personal liability for loss or damage suffered by others in the rental property is a prudent move.
Before making an investment in renter’s insurance, it is also a wise move to familiarize yourself with the elements that make up an insurance policy.
The language of insurance policies (which are legally binding documents) is very legalistic, and can appear intimidating and incomprehensible at first glance. Understanding how a policy is constructed, however, can go a long way toward cutting through the legal jargon. The time to familiarize yourself with the content of your insurance policy is before you sign on the dotted line and write that first premium check.
Definitions. The first section of most policies is devoted to definitions of the elements of the policy. These definitions describe the insurer, the insured party, locations covered, injuries and losses covered, and what constitutes loss, damage, or liability under the policy. A clear understanding of what the terms in the policy mean is necessary if you are to correctly interpret the rest of the policy.
Coverage. This section details the types of losses or liability covered. It also lists any deductible amounts that apply to the policy.
Exclusions. In this section of the policy, losses that are not covered are listed. While there are some common exclusions, such as acts of war or terrorism, or negligence on the part of the insured, some companies might have specific exclusions for certain areas of the country, such as water or flood damage, especially in areas of the country that are flood prone. While it is important that you understand the entire policy, it is absolutely essential that you fully understand the contents of this section. Learning of an exclusion after you have incurred a loss can be emotionally and financially devastating.
How to file claims. This part of the policy outlines the procedures to be followed after a loss or damage incident. It gives the time frame for filing, and outlines the information that must be included in order for the claim to be accepted. Failure to understand and comply with the provisions of this section can result in delay of payment or denial of a claim.
General conditions. This is a catchall section in most policies that covers such things as: appraisals of damage or loss, terms and conditions for policy cancellation or renewal, and limitations when fraud or misrepresentation occurs. While it might seem insignificant, it is important to know these conditions.
Despite the legal jargon in an insurance policy, it is not necessary to have a law degree to adequately understand it. By carefully reading each section, making sure you understand how each relates to the others, and with due attention to the fine print, you can become a savvy insurance consumer. While the details of policies vary somewhat from company to company, the above sections are common to most. If in doubt about the meaning of any provision in a policy, do not hesitate to seek legal advice.