Newsletter Articles

iNews Articles 2011

Wellness Awareness

Glossary of Terms

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Colorado Nonprofit Insurance Agency is a wholly owned Subsidiary of Colorado Nonprofit Association

I have insurance but I don’t understand my policy!
Understanding Your Insurance Coverage

An insurance policy is a contract that defines the obligations of both the insured and the insurer. Most insurance policies contain terms that are hard to understand and policies are often written in a confusing manner. Insurance policy language can appear to be difficult to understand. But this language, specific to insurance and the law, is not so difficult once you are familiar with the terminology.

Every insurance policy has five parts:

• Declarations
• Insuring agreements
• Definitions
• Exclusions
• Conditions

Declarations – Usually the first page of the policy, it is often called the “dec” page. It summarizes key information specific to the policy. It will show the insured’s name and address, the policy dates, a brief description of the business, coverages provided, coverage limits, premiums and the forms in the policy.

Insuring agreements – These agreements specify what the insurance company has agreed to pay for in exchange for the premium. There may be a section marked insuring agreements, but not always. Some policies may call an insuring agreement a “coverage” and there may be multiple coverages. An insurance policy begins by declaring what it covers and then proceeds to restrict, limit and exclude coverages.

Definitions - Be sure to research definitions of insured, loss, claim, policy period and wrongful act to determine if the policy will cover an incident and for whom. Words that have special meaning will usually be in quotation marks or bolded. Most policies will have a section where these terms are defined.

Exclusions – Every policy has exclusions or policy provisions that eliminate coverage for specified exposures. This practice clarifies the coverage granted by the policy. Most policies have a section entitled exclusions. Always read the policy carefully and note the provisions that apply to your operations.

Conditions – These statements qualify the various promises made by the insurance company. An insurer does not promise to cover all losses. Certain requirements will be imposed by the insurerer such as premium payment or duties to follow after a loss. Failure to meet your obligations can void the policy or restrict coverage.

Endorsements – Found in most policies, endorsements are policy forms that modify the main coverage form. They can add coverage or they can modify the coverage by revising a definition. Endorsements can also restrict or exclude coverage.

Steps in Reviewing an Insurance Policy

1. Check for Accuracy. There may be spelling errors, the wrong named insured, incorrect additional insureds, the wrong forms or not include a purchased coverage. If you find errors, report those immediately to your agent. Remember that this is a contract and must be correct.

2. Review the Rating Classifications. Your premium rates are based on rating classifications so make sure that you have been classified correctly. The rating should describe your organization’s operations. If your rating should be “outside sales” and you have been rated as “carpenter”, notify your agent immediately because your premium will be much higher than it should be.

3. Read the Policy and Answer These Questions.

• Does the insuring agreement cover each expected claim possibility?
• Is there any exclusion that eliminates or restricts coverage?
• Are there any exclusion exceptions that restore coverage?
• What policy conditions must the organization comply with?
• Are the people or operations affected by the conditions aware of them?
• If the potential loss is covered, is there a deductible? How much is it? Does it fit within your budget for this type of incident?
• How much will the policy pay for each loss?

Ambiguous language can sometimes favor the insured. The courts construe the policy language in favor of the insured, generally providing coverage for the policyholder.

The staff at Colorado Nonprofit Insurance Agency is very knowledgeable about your insurance coverages and the details of your policy. We are always willing to help you understand your policies – education is just one of our goals.