Do you know how to interpret an insurance policy, understand its content?

Are you one of those who take out the insurance policy and then don’t read it?

Well, you are making a mistake.

It is a contract and you run the risk that when the time comes you will find yourself with the surprise that there is no coverage for that incident. More than 18% of those who take out insurance do not read the conditions, and 54% do so above.

An insurance policy is certainly not a ” best seller, ” although many copies are sometimes sold. It is not very entertaining to read and difficult to understand. Especially when you are faced with long and cumbersome texts and terminology only for the initiated.

Don’t mess around!

In this article, I am going to tell you how to interpret an insurance contract. I will mark what content is essential that you review to facilitate the reading of the fine print. And by the way, you can clear those doubts that you did not dare to ask.

What is an insurance policy?

Before breaking down what an insurance contract is made of, it is important to remember what it is and what it is for.

The insurance contract is the one by which the insurer undertakes, by charging a premium and in the event that the event occurs whose risk is covered, to compensate, within the agreed limits, the damage caused to the insured, or to satisfy a capital, an income or other agreed benefits.

Article 1 Insurance Contract Law

An insurance contract can have any object of risk, as long as there is an insurable interest and it is not expressly prohibited by law.

The policy is the written instrument that regulates the conditions of the insurance contract. It is the private document that contains the rights and obligations of the parties that sign it. In addition, it is an adhesion contract so any modification must be made through expressly agreed clauses.

For this reason, when contracting insurance, together with the proposal, the application, or the policy itself, the insurer must give you: the general, particular, special conditions and any other complementary document that you have to subscribe.

The booklet of the General Conditions

For the same type of insurance, there are clauses that are common to all contracts, which is why insurers have printed or pre-printed conditions, the so-called General Conditions.

You can request that the insurance policy be drawn up in any of the official languages. Also that it is done in a different language in accordance with Directive 92/96 of the EU Council.

Computer digitalization has also reached the policies obliterating the book of general conditions.

Whatever the format in which they are delivered to you, the exclusions or limitations to the coverage of the contract, they must be highlighted typographically.

These are the contents that you must find in the general conditions, pay attention to the priority ones:

The rules that regulate the contract

List of the legislation to which the contract is subject. Basically, they refer to the Insurance Contract Law, Data Protection Law, Management and Supervision of Private Insurance, CCS legal statute, or the Mediation Law.

The contract persons and definitions

This section refers to the persons who may intervene, their function, or the definitions of the terms of the insurance contract.

The object of the insurance and the excluded goods.

They refer to the coverage assumed by the insurer, defined in the particular conditions. Those assets that are not covered are also described. You should not confuse it with uncovered risks that we will talk about later.

The risks covered.

In this section, you will find all the coverages offered by this type of insurance. But this does not mean that all of them are the ones you have hired, so you should go to the particular conditions to see which ones you have included in your policy and what are the insured limits or the excesses that affect each one.

Risks and Damages Not Covered.

If everything is relevant, I especially recommend reading this section, because in it you will find the list of risks not covered. It will depend on the type of insurance that this list is more or less extensive because it contains all the exclusions that affect the contract.

An optional form of assurance.

This is a section that you will find in the damage policies (SME, industry, etc.). It defines those forms of insurance whose acceptance is optional for the company. Normally it refers to the fixed and floating capital of the insurance of inventories or extension of the coverage in the valuation in case of loss.

The basis of the contract.

It defines the documents that together with the policy are part of the contract, such as the application or the insurance proposal. They also regulate the rights and obligations of the parties regarding the declaration of risk, its inaccuracy, the aggravation, reduction, disappearance, or transmission of risk.

The formalization of the contract, its duration, the payment of premiums, and the payment address is also part of this section.

Other aspects that are important in the long run are those related to the termination or nullity of the contract and the prescription of the actions derived from it.

Claims and their processing.

It is important that you know what duties you have to communicate the loss, rescue, and reduce the consequences. It is also important that you know how the damages are assessed, the compensation is determined and they pay you.

Conflict resolution.

Do you know who you can go to in case of conflict? This section of the insurance policy explains to whom you can direct your claim in case of conflict with the insurer. Of course, knowing how to do it can solve more than one setback.

You should also find two very special clauses:

Indemnification clause by the Insurance Compensation Consortium.

It establishes the extraordinary events that are covered, the risks excluded, the applicable franchise, or the procedure for action in the event of a claim.

Data protection clause.

It collects everything related to the treatment of your data and its use by the company. The address where to go should appear in case you decide to exercise the rights of access, rectification, cancellation, and opposition.

And something very important that you should keep in mind about your data. The legislation allows them to be assigned or part of them, and those generated in the event of a claim, to public and private organizations related to the insurance sector for statistical purposes and fraud prevention, in the selection of risks and settlement of claims.

Any modification that is established in the coverage, exclusions, or limitations must be inserted in the particular conditions, partially or totally repealing what is indicated in the general conditions.

The 9 points that you must review, yes or yes, in the Particular Conditions

But an insurance policy is an individual contract so it has to be personalized, this is done through the Particular Conditions.

They contain the data and specific clauses that identify and regulate the contract and so that you have no doubts about its content, these are the 9 points that you have to check yes or yes.

#1. The contracting parties

It must contain the name and surname or company name of the contracting parties and their address, as well as the designation of the insured and beneficiary, if applicable. Above all, check that the personal data is correct and does not contain any errors.

#2. The concept in which it is insured

It refers to the condition of each of the parties that grant the contract, the policyholder, and the insurer. Both are the ones obliged to comply with the agreed conditions.

#3. The nature of the hedged risk

It must describe in a clear and understandable way, the guarantees and coverage granted in the contract, as well as with respect to each one of them, the exclusions and limitations that affect them highlighted typographically.

#4. Designation of the insured objects and their location

It will contain information related to the insured object, its characteristics, and the situation where it is located or the radius of action. For example, in car insurance, the data is the identifiers of the vehicle, characteristics, and habitual driver. In a home, the elements of the property, the location, or prevention and protection measures.

#5. The sum insured or the scope of coverage

You have to check that the insurance sum assigned to each of the coverages is clearly stated. You must also make sure that the insurance method or the amount of the franchise is listed if any.

#6. Amount of premium, surcharges, and taxes

The price of the insurance must be itemized. For this, the policy will state the net insurance premium, the taxes and surcharges that are levied on it, and the total premium for the initial period according to the chosen payment method.

In the case of a policy with floating capital, the way in which the payment will be made must be established.

#7. Maturity of premiums, place, and method of payment

Check that the expiration of the insurance corresponds to the agreed date. There are insurers that offer you the possibility of changing the date by anticipating it to the first day of the month or delaying it to the first day of the following month.

Another element that should appear in the form and place or means of payment of the premium. To learn more about this, I advise you to read this post: What form of payment am I most interested in insurance to save money?

#8. Duration of the contract

If you have read the article that I recommended in the previous point, you will have read about the duration of the contract. Well, the policy should indicate the day and time when your coverage begins and ends.

#9. The contract mediator

Regarding the mediator, in addition to the identification data, it must contain the type of mediator in question. The amount you receive for your work should be reported shortly.

With all this, we have already written between 30 and 40 pages of an insurance contract, but something else is still missing. Read on to find out.

The Special Conditions of the policy

These are specific conditions that affect certain circumstances of the insurance contract. They are generally used to remove some exclusions or to include new ones.

Do you have a mortgage and the bank requires a transfer of rights in the insurance?

Well, the clause that is included in the insurance policy for the loan will be a special clause.

The risk ratio in a damage policy or the nominal ratio of the insured in an accident group is special clauses.

The coverages or exclusions referring to the health status of an insured are also special clauses in a medical insurance policy.

Clauses based on international treaty coverage are also part of these special conditions.

Why is it necessary to pay attention to the content of the policy?

Well, because you have one month from the delivery of the policy to claim the insurer to remedy those clauses that do not conform to the agreement or the insurance proposal.

After that period without claiming, you will have to comply with the provisions of the policy. By the way, this clause must also be included in any insurance policy.

conclusion

Spending a few minutes reviewing the insurance policy means saving time because you can rectify it if it does not conform to what was agreed. But also, in the event of a claim, if it is well done, it will avoid unnecessary conflicts. Knowing what it covers, what it excludes, or who to turn to in case of conflict will make your effort not wasted.

But in addition, the conditions of the contract cannot be harmful to the insured. They must be written clearly and precisely, highlighting especially the limiting clauses of the rights of the insured.

Especially relevant is that they must be governed by the mandatory provisions of the LCS unless it provides otherwise or there is specific legislation for this type of insurance.

Attention! It is very important that you know that the insurance contract will be void, except in the cases provided for in the Law, if at the time of contracting the risk does not exist or the loss had occurred.

Have you ever read your insurance policy, was it easy for you to understand its content?
I wait for you in the comments and if you have any questions about your policy, raise it to answer it.

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