How to Read Your Insurance Policy Like a Book
By Denise Aronson, Vice President, Momentous Insurance Brokerage, Inc.
How many times have you picked up a book because the cover entices you? You read the synopsis on the back and say “this looks really good.” So you buy it, take it home and start to read it. And you’re disappointed as it’s not at all what you thought it was.
The same holds true for insurance policies.
Look Past the Cover of Your Policy
Most people, when shopping their insurance, look at the declaration page for coverage comparisons and premiums. And then they question why company A’s premium is higher than company B’s premium, when the declaration page reads the same on both. The answer is easy. The coverages are NOT the same.
A quote or declaration page is just an outline of your coverages. This would be the book’s cover. The policy defines what is covered and what exclusions are being implemented. This would be the book contents.
Chapter 1: The Auto
A rock has damaged Kelly’s windshield. Kelly has an auto policy which provides coverage for the windshield under her comprehensive coverage. Her deductible is $250. Sam also has a damaged windshield. He too has an auto policy that provides coverage for broken windshields under his comprehensive coverage, with a $250 deductible and no deductible for windshield losses. The estimate to repair the windshield, for both insureds, is $400. Will both the insured’s carriers’ payout the same amount?
Kelly’s carrier paid her $150 ($400 – $250 deductible) for the windshield damage. Sam’s carrier paid him $400 for the windshield damage.
Chapter 2: The Home
Aaron & Jill are neighbors. Each has their home insured for $500,000 on the dwelling. Aaron’s home Extended Dwelling Replacement Cost is 150%. Jill’s home has 200% Extended Dwelling Replacement Cost. Both homes are burned to the ground. The cost to rebuild their homes is $800,000. Based on the above coverages, Aaron’s policy will pay him $750,000, while Jill’s policy will pay the entire $800,000.
What does all this mean? Don’t judge one declaration page to another. Read the policy. Or contact your agent for details.
Disclaimer: The above response is a general overview which is provided for discussion purposes only and is not in any way meant as providing recommendations or legal counsel. It is not intended to apply to each circumstance. Because the facts and circumstances of every matter differ and the terms, conditions, exclusions and limitations contained in insurance policies vary, you should review your policy carefully and seek any legal counsel that may be necessary or appropriate. Momentous is not responsible for any losses or damage resulting from reliance on the information contained herein. If you would like to further discuss the issues raised here, you may contact Denise Aronson by phone 818-933-2703 or email: daronson@mmibi.com.
Great tips! It’s so easy (and tempting) to just skim stuff like this and it’s definitely important to take it seriously and read it thoroughly!
I’m glad you enjoyed it.