Why it’s important to know your policy
Your car, home or business are likely your most valuable assets. That’s why it’s important to ask questions and know your policy before a potential disaster strikes.
Contact your insurance representative to review your existing policies, start new policies, and ask questions to ensure you're properly protected.
How insurance works
Insurance is a contract – also known as a policy – that protects you against financial loss under certain circ*mstances. Understanding your policy includes understanding how insurance works.
When you buy insurance, the money you pay – your premium – is put into a large pool with the money many others pay. Some of that pool of money helps pay insured people who suffer a financial loss in that year. Financial payments for these losses are called claims. Here’s how it works:
Your insurance company estimates an annual cost or premium to accept the risk of covering your home, business or car. Premiums are based on how much money insurance companies think they will need to pay for the coming year's claims. There are many factors that go into this – like where you live, your claims history and the value of your property. Learn how home, auto and businessrates are set.
On a monthly or annual basis, you pay a premium to your insurer for taking on this risk on your behalf.
Your insurance company puts premiums into one large pool of money to pay for claims. Typically, insurance is an annual contract, so the pool has premiums being added and subtracted from it all the time.
Not everyone makes a claim so your insurance company uses the pool of premiums from many people to pay the claims of a few people.
Know how to read your insurance policy
Your policy is a legal document and it’s your responsibility to understand what is – and is not – included in it. While your insurance representative should be your go to person to understand the details of your policy, we’ve highlighted some important terms here.
The declaration is the first part of your policy and its purpose is to outline basic information about the policy. A declaration includes information about:
Type of document (i.e., renewal) and policy number
Who’s insured (i.e., individual or business) and mailing address
The policy period – the effective dates of coverage
Policy limits including
the amount of liability insurance purchased
any deductibles – the amount you are responsible for paying in the event of a claim
The total policy premium – the amount you pay, calculated based on the probability that you may suffer a claimable loss
Others who have an interest in the policy, such as a mortgage holder and lender
See AlsoPolicygeniusA list of form numbers – coverages and endorsem*nts that add to or alter the policy. Understand these, as some of these coverages are optional and you must request they be added to your policy.
The insurance company’s name and mailing address
An emergency phone number for reporting a serious loss after regular business hours
An endorsem*nt is added to your policy – also known as an insurance rider – that either changes or adds to existing coverage. An endorsem*nt may increase, limit or restrict the scope of coverage. It may also clarify a unique loss exposure, or add insured parties or locations.
In the simplest terms, it’s the promise your insurer makes. An insuring agreement includes information about:
What specific losses are covered
The type of insurance and a description of what’s covered
The specific risks, also known as perils, insured against – circ*mstances under which the insured may receive compensation after a loss
Exclusions that eliminate specific uninsured hazards.
For a claim to be valid, it must be covered under the policy – the insuring agreement – and not stated as an exclusion.
Note: Exclusions specify what’s not covered by the policy.
To maintain coverage, the insured individual or business must fulfill specific requirements – these are known as the policy or statutory conditions.
If an insured individual or business breaks, or fails to observe, a policy condition:
the policy may be void, which means it’s not valid or legally binding
the policy may be voidable, which means the insurance company may choose to cancel it, or
the insurer may refuse a claim related to the broken or failed condition
This typically occurs when the risk is materially misrepresented or crucial information about the risk is withheld when a policy is purchased.
It’s important to understand the exclusions and limits in your policy to avoid potential disappointment after a loss.
An exclusion specifies a loss or type of property that isn’t covered by your insurance policy.
Certain perils – events or circ*mstances that result in property damage – may be excluded from your coverage.
Your policy covers insured property only up to a specific amount, which is known as a Special Limit. Items such as cash, jewellery, furs, watercraft, fine art and antiques are typically subject to a dollar limit. If you need a higher limit, your insurance representative can offer endorsem*nts that cover these.