Insurance 101: Understanding your insurance contract

If you are like most people, insurance is something you struggle to understand. We can assure you that you are NOT alone. A lot of the calls we receive at the General Insurance OmbudService (GIO) are calls from consumers who are looking for information about the specifics of their policy. That’s why we are going to break down common questions and provide information that we think consumers, like you, want to know.  

Starting at the beginning, is the contract. We are going to highlight the basic components of the insurance policy, or the contract of insurance.

Your policy is made up of several different parts: the declaration pages, the insuring agreements, the endorsements, exclusions and special limits, and finally the policy or statutory conditions. The Insurance Bureau of Canada lays out the parts of the policy as follows:

Declaration Page

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 the following:

Type of document (example: New Business, Renewal) It will include your policy number. That is your unique identifier with the insurance company.

Who is Insured (example: An individual, couple or a business) as well as the mailing address.

Policy Period this is the effective date (the start date of coverage) as well as the expiry date (when coverage will end).

Policy Limits this section will include the amount of insurance purchased as well as any deductibles that would apply. A deductible is the amount you (the policy holder) are responsible to pay when you claim for coverage under your insurance policy.

Policy Premium this would be the amount you pay

Interested Parties this portion will include others who may have an interest in the policy, such as a mortgage company or vehicle financing company.

Coverages & Endorsements this section lists the specifics of your coverage, this will also include any endorsements (additional optional coverage) you have purchased.

Insuring company information, this sectionwill typically include the name and mailing address of the insurance company as well as contact information should you need to submit a claim.

Insuring Agreement

This is the agreement, or promise, your insurance company makes to you regarding payment in the event of a loss. The insuring agreement lays out the specifics of what types of losses would be covered. It specifies the type of insurance and a description of what is covered; the specific perils covered (these are the types of losses or circumstances under which the policy will pay out). Finally, the exclusions, these are perils that are NOT covered by the policy.

Endorsements

An endorsement is added to your policy; it either changes or adds to the existing coverage. An endorsement may increase, limit, or restrict the scope of coverage. It may also clarify a unique loss exposure or add insured parties or locations.

Exclusions

An exclusion specifies a loss or type of property that is NOT covered by the insurance policy. Certain perils, events, or circumstances 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, jewelry, furs, watercraft, fine art, and antiques are typically subject to a dollar limit. If you need a higher limit, your insurance representative may offer endorsements that cover these.

Policy or Statutory Conditions

To maintain coverage, the insured (that’s you) or your business must fulfill specific requirements in order to get the coverage you have contracted for. These are known as the policy conditions or statutory conditions. If an insured fails to observe or breaks a policy condition, there could be repercussions. The potential is that the policy may be voided, which means that it’s not valid or legally enforceable. The insurer could choose to cancel the policy, or the insurer may refuse a claim. This typically occurs when the risk (the object that is insured) is misrepresented or crucial information about the risk is withheld when a policy is purchased.

GIO is an independent body set up to help Canadians find a fair resolution to disputes with insurance providers. GIO can provide advice on dealing with your insurance company as a first step. If you are not satisfied with the decision from your provider, GIO may be able to help resolve your concerns. 

Find out how to contact us here.

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