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How to easily understand your insurance policy

 How to easily understand your insurance policy

How to easily understand your insurance policy
How often must the commissioner examine each domestic insurance company?


The basics of an insurance contract

Contract values

Insurable Interest

The principle of solutions

The Doctrine of Good Faith

Other policy aspects


There are certain types of insurance that most people need. For example, if you own a home, homeowner insurance might be standard. Auto insurance covers your car while life insurance protects you and your loved ones in the worst-case scenario.

When the insurance company gives you the policy, it is important to read it carefully to make sure you understand it. 

Your insurance advisor is always there to help you with the tough terms on insurance forms, but you should also find out for yourself what your contract says. 

In this article, we'll make reading your insurance contract easy, so you understand its basic principles and how they are used in everyday life. humana a

The main concerns

• Life insurance contracts explain the terms of your policy, including what is and what is not covered as well as what you will pay.

• A life insurance contract can contain terms and terms that you may not be familiar with right away.

• It is important to read the insurance contract carefully before signing so that you understand what you agree to.

• Review the contract carefully to check for any errors that may affect your coverage or your costs. humana r

Basics of an insurance contract

When reviewing an insurance contract, there are certain things listed that are usually general.

Offer and Acceptance: When you apply for insurance, the first thing you do is get a proposal form for a specific insurance company. After filling in the required details, you send the form to the company (sometimes with a distinguished check).

This is your offer: If the insurance company approves your insurance, this is called admission. In some cases, your insurance company may agree to accept your offer after making some changes to the proposed terms.

Consideration: This is the future premium or premiums that you will have to pay to your insurance company. For insurance companies, the consideration also indicates the money paid to you if you file an insurance claim.

Legal capacity: You must be legally eligible to enter into an agreement with your insurance company. If you are a minor or mentally ill, for example, you may not be eligible to enter into contracts. Likewise, insurers are eligible if they are licensed under the prevailing regulations that govern them.

Legal purpose: If the purpose of your contract is to encourage illegal activities, then it is invalid.


If you do not fully understand the terms, do not sign the insurance contract without first consulting an insurance expert. seguro sr22

Contract Values

This section of the insurance contract specifies what the insurance company may pay you for a qualifying claim, as well as what the insurance company may pay you for the discount.

How these sections of the insurance contract are structured often depends on whether or not you have a compensation policy. euler hermes allianz

Compensation contracts

Most insurance contracts are compensation contracts. Compensation contracts apply to insurances where the loss incurred can be measured in terms of money.

• The principle of compensation: This states that insurance companies do not pay more than the actual loss incurred. The goal of the insurance contract is to keep you in the same financial position you were in before the accident that led to the insurance claim. 

When your old Chevy Cavalier is stolen, you cannot expect your insurance company to exchange it for a brand new Mercedes-Benz. In other words, you will be paid according to the total amount that you have included for the car.

There are some additional factors to your insurance contract that create situations where wages are not paid for the full value of the insured asset.

• Lack of insurance: Often times, in order to save in installments, you can secure your home for $ 80,000 when the total home value reaches $ 100,000.

At the time of partial loss, the insurer will only pay you $ 80,000 while you have to dig up your savings to cover the remainder of the loss. This is called underinsurance, and you should try to avoid it as much as possible.

• The increase: To avoid frivolous claims, insurance companies have introduced provisions like surplus. For example, you have car insurance with an applicable increase of $ 5,000. Unfortunately, your car had an accident with a loss of $ 7,000.

The insurance company will pay you $ 7000 because the loss has exceeded the limit of $ 5,000. 

However, if the loss reaches $ 3000, the insurance company will not pay a single penny and you will have to bear the expenses of the loss yourself. In short, insurance companies will only accept claims if your losses exceed the minimum amount set by the insurance company. 

• Deductible: This is the amount you pay in personal expenses before the insurance company covers the remaining expenses. So, if the deductible is $ 5,000 and the total insured loss is $ 15,000, your insurance company will only pay $ 10,000. The higher the discount, the lower the premium, and vice versa.

Non-compensation contracts

Life insurance contracts and most personal accident insurance contracts are non-compensation contracts. You can purchase a million-dollar life insurance policy, but that doesn't mean your life is worth that dollar amount. Since you cannot calculate and price your net worth in life, a compensation contract does not apply. texas ins

A life insurance contract usually includes the following:

Announcements page: This is often the first page of a life insurance policy and includes the name of the policy owner, policy type and number, issue date, effective date, premium class or price category, and any two passengers you choose to add. 

If you purchase a term policy for a life term, the ads page must also specify the length of coverage.

Policy terms and definitions: You may see a separate section in your life insurance contract detailing terms and definitions, including death benefits, premiums, beneficiary, and age of insurance. 

Your insurance age maybe your actual age or the earliest life insurance company determines for you.

Coverage details: The coverage details section of your life insurance contract provides in-depth information about your policy, including how much you will pay for premiums when these payments are due, penalties for lost payments, and who the death benefits on your policy should be paid to.  

For example, you might have only one primary beneficiary or a primary beneficiary with multiple potential beneficiaries. ifrs17

Additional policy details: There may be a separate section in your life insurance contract that covers passengers if you choose to add any. Riders extend the coverage of your policy. 

Shared life insurance riders include fast death benefit riders, long-term care passengers, and critical illness riders. These add-ons allow you to take advantage of your death benefits while you are still alive if you need the money to cover expenses related to a terminal illness.

When you decide that life insurance is something you need, it is important that you compare the options carefully. For example, you might lean toward life versus permanent life insurance if you don't need life coverage. Or you may prefer permanent coverage if you treat life insurance as an investment.

Either way, it is important that you shop around to find the best life insurance companies.

 Using a life insurance calculator can help you decide what type and how much coverage you need. dppo

Insurable Interest

It is your legal right to ensure any type of property or any event that may cause financial loss or create legal liability for you. This is called an insurance interest.

Let's say you live in your uncle's house, and you apply for homeowner's insurance because you think you may inherit the home later. Insurance companies will reject your offer because you are not the owner of the home and, therefore, are not financially incurred in the event of a loss.

When it comes to insurance, it is not the home, car, or machinery that gets insured. Instead, it is the monetary interest in that home, car, or machine that your policy applies to.

The principle of the insurance interest is what allows spouses to issue life insurance policies for each other, based on the principle that one may suffer financially if the husband dies.

There is also an insurable interest in some business arrangements, as it appears between a creditor and debtor, between business partners, or between employers and employees.


In life insurance contracts, a person with an insurance interest can include your spouse, children, or grandchildren, an adult with special needs who is also dependent or elderly parents.

The principle of solutions

Replacement allows the insurance company to sue a third party who caused the loss of the insured and follows all methods of recovering some of the money that is paid to the insured as a result of the loss.

For example, if you are injured in a road accident due to the reckless driving of another party, you will be reimbursed by your insurance company. Also, your insurance company may charge a rash driver in an attempt to recover that money..

How to easily understand your insurance policy 1
When an insurance producer negotiates for an insurance contract on behalf of a client?

The Doctrine of Good Faith

All insurance contracts are based on the concept of Operima Vides or the principle of maximum goodwill. This doctrine emphasizes the existence of a mutual belief between a believer and a believer. 

In simple terms, while applying for insurance, it becomes your duty to disclose truthfully relevant facts and information to the insurance company.

Likewise, the insurance company cannot hide the information regarding the insurance coverage that is being sold.

The duty to disclose 

You are legally obligated to disclose all information that may affect the insurance company's decision to enter into an insurance contract. 

The factors that increase the risk should be disclosed - past losses and claims under other policies, insurance coverage that has been denied in the past, the existence of other insurance contracts, full facts and descriptions regarding the property or event to be insured.

These facts are called material facts 

Depending on these core facts, your insurance company will decide whether to insure you in addition to the premium. Smoking is an important material fact for an insurance company, for example, in life insurance. 

As a result, your insurance company may decide to charge a much higher premium as a result of your smoking habits. humana h1

Representations and warranties 

For most types of insurance, you must sign a declaration at the end of the application form, which states that the answers provided to the questions contained in the application form and the data and other personal questionnaires are correct and complete. insurance home

For example, when applying for fire insurance, you must ensure that the information you provide regarding the type of construction or use of your building is technically correct. 

Depending on their nature, these statements may be either representations or warranties.

A) Declarations: These are the written statements that you have provided on your application form, which represent the suggested risks to the insurance company. 

For example, on the life insurance application form, the information about your age, details of family history, occupation, etc. are the representations that must be true in all respects. 

Acknowledgment breach only occurs when you provide false information (for example, your age) in important terms. However, the contract may or may not be void depending on the type of misrepresentation that occurs. seguro univista

B) Guarantees: guarantees differ in insurance contracts from those of normal commercial contracts. They are imposed by the insurance company to ensure that the risks remain the same throughout the policy and not increase. 

For example, in auto insurance, if you loan your car to a friend who does not have a license and that friend is involved in an accident, your insurance company may consider it a breach of the warranty because it has not been notified of the change. As a result, your claim may be denied.

As mentioned earlier, insurance works on the principle of mutual trust. It is your responsibility to disclose all relevant facts to your insurance company. A breach of the utmost goodwill usually occurs when you fail, intentionally or accidentally, to reveal these important facts. There are two types of non-disclosure:

• Innocent non-disclosure relates to the failure to provide information that you were not aware of

• Intentional non-disclosure: intentionally providing material incorrect information

For example, suppose you did not know that your grandfather died of cancer, and therefore, you did not disclose this material fact in your family history questionnaire when applying for life insurance; This is innocent. 

However, if you become aware of this material fact and intentionally remove it from the insurance company, you are guilty of fraudulent non-disclosure.

When you provide inaccurate information with the intent to deceive, your insurance contract is void.

• If this intentional breach is discovered at the time of the claim, your insurance company will not pay the claim.

• If the insurance company considers the breach innocent but significant, it may choose to punish you by charging additional premiums.

• In the event of an innocent breach unrelated to the danger, the believer may decide to ignore the violation as if it had never occurred. insurance

Other Policy Aspects

Adhesion doctrine. The adhesion doctrine states that you must fully accept the insurance contract and all of its terms and conditions without compromising. 

Since there is no opportunity for the insured to change the terms, any ambiguities in the contract will be interpreted in his or her favor.

The principle of assignment and closure. A waiver is a voluntary assignment of a known right. Estoppel prohibits anyone from asserting those rights because he has acted in a way that denies the interest in preserving those rights. 

Suppose you fail to disclose some information on the insurance proposal form. The insurance company does not require this information and issue an insurance policy.

This is a concession. In the future, when a claim arises, your insurance company cannot question the contract on a non-disclosure basis. This is the closing. For this reason, your insurance company will have to pay the claim.

Certifications are usually used when changing the terms of insurance contracts. It can also be issued to add specific conditions to the policy.

Co-insurance refers to the participation of insurance by two or more insurance companies at agreed rates. For securing a large shopping mall, for example, the stakes are very high. Therefore, an insurance company may choose to involve two or more insurance companies to share the risk. 

There may also be co-insurance between you and your insurance company. This provision is so common in medical insurance that you and the insurance company decide to share the covered costs in a ratio of 20:80. 

So, during a claim, the insurance company will pay 80% of the covered loss while it pays off the remaining 20%.

Reinsurance occurs when your insurance company "sells" a portion of your coverage to another insurance company. Let's say you are a famous rock star and want to secure your voice for $ 50 million. 

Your offer has been accepted by the "A" insurance company. However, A Insurance Company is not able to retain the entire risk, so it passes a portion of that risk - let's say $ 40 million - to Insurance B.

If you lose your singing voice, you will lose receiving $ 50 million from Insurance Company A ($ 10 million + $ 40 million) with Insurance Company B contributing the reinsurance amount ($ 40 million) to Insurance Company A. 

This practice is known as reinsurance. In general, reinsurance is practiced to a greater extent by general insurance companies than by life insurance companies. insurance policy


When applying for insurance, you will find a wide range of insurance products available on the market. If you have an insurance advisor, they can shop around and make sure you have the right insurance coverage for your money. 

However, a little understanding of insurance contracts can go a long way in making sure your advisor's recommendations are on the right track.

Moreover, there may be times when your claim is canceled because you did not pay attention to certain information that your insurance company required. In this case, a lack of knowledge and neglect can cost you a lot. life insurance contracts

Review the features of your insurance company's policy rather than sign it without going into the minutiae. If you understand what you're reading, you can be sure that the insurance product you sign up for will cover you when you need it most.