Insurance is confusing, so when terms like schedules, endorsements, liability, package policies, exclusions, conditions (you get the idea ?), get thrown around its natural to feel overwhelmed.
That is why it is so important to have an independent insurance adviser as your guide throughout your business journey. When it comes to protecting your business, having an educated adviser explain your insurance policy in simple everyday language should be one of your top priorities.
The goal of this blog post is to breakdown the insurance basics to help you understand the meaning behind some of that insurance jargon.
First things first, (I told you this was basic), what is a policy?
A policy is a complete insurance contract. The insurance contract will differ depending on the exposures, insurable interests, risk tolerance, and coverage uniquely underwritten for that business.
Your typical insurance policy will generally consist of declarations, forms, and endorsements.
Declarations are usually on the front page or pages and states the name insured, your address, policy period, location of your premises, and policy limits. The declaration page is commonly known as the information page.
Forms contain major policy provisions.
The forms explain the insuring conditions, in other words, the type of losses that are covered and excluded. These forms are not universal and will vary by insurance carrier—it is very important to understand this part of your insurance policy.
Endorsements are modifications or additions to an existing insurance contract which changes the terms or scope of the original policy. It is basically used to add, delete, exclude or alter coverage.
Schedules are lists in your policy. You could have one schedule or many within your policy. Schedules of locations, equipment, payroll or covered automobiles, for example.
Package policies are exactly how it sounds and are very common in commercial insurance policies. All this means is that you have two or more types of coverage in a single insurance contract. For example, a business owner’s policy is a package policy that includes both general liability and commercial property coverages.
Monoline policies are insurance policies that only provide one type of coverage.
Some other important parts to mention within an insurance policy are Insuring Agreements, Exclusions, Conditions and Definitions.
An Insuring Agreement is a brief statement outlining the payment terms and conditions by the insurer in the event of a covered loss. It typically begins with the words, “We will pay.”
Exclusions describe the risks that are not covered under your insurance policy. If your policy offers more than one coverage, each coverage section will list its own set of exclusions. Some exclusions may apply to all coverage sections.
Conditions describe obligations or rules and processes that must be met for applicable coverage to apply.
Definitions are words in the policy that have specific meanings under the contract. Those definitions are defined within the policy so that the policyholder can understand the scope of coverage provided by the policy.
It is important to remember that business insurance policies are not one size fits all and should be tailored to your needs. Insurance has its own dedicated line on your balance sheet. It’s an expense that no one enjoys paying, but it’s purpose is far greater than most products you purchase to enjoy. Don’t let the value of your insurance get lost in translation, talk to an independent insurance adviser that will help you navigate your risk and provide new meaning to your insurance policy.