Handy Guide to Reading Your Insurance Policy

Here’s a choice for you – would you rather go to the dentist or read your insurance policy?

Reading your policy, or at least having some understanding of it, doesn’t need to be daunting. Here’s a quick guide to understanding the structure and content of it.

Your Policy Has More Than One Document

  • The policy wording: When you open your policy booklet you will find that there are sections which detail the covers that apply and circumstances in which cover will not apply (referred to as exclusions or exceptions).
  • The schedule: This details the risk information specific to you. For example, your name and address, car details, and the cover you have selected.
  • A certificate of insurance and insurance disk (for motor insurance policies)

Policy wordings can run to 50-60 pages long. They are seldom an enjoyable read. However, there is a common structure to most of them. To help our understanding, let’s break the policy wording down.

Policy Wording

You take out motor and home insurance to provide you with financial protection against loss or damage which may result from certain causes. The insurer agrees to provide the specified cover, subject to certain conditions.

Most of us are familiar with the ‘what is covered’. If you buy comprehensive car insurance you know that the policy covers your liability to others, loss or damage to the insured car due to fire and theft, accidental loss, or damage of the insured car.

The Exclusions or Exceptions (‘what is not covered’) are usually stated in two places. There will be exclusions which apply to the whole policy (i.e. circumstances that are never covered). An example is loss resulting from an act of war or terrorism. You will find these exclusions recorded in a ‘General Exclusions’ or ‘General Exceptions’ section.

Often there are exclusions applicable only to specific elements of your cover. You will usually find these recorded within the cover section. A common example which applies to vehicle theft is that cover does not apply where the keys to the vehicle are left in or on the vehicle while it is unattended.

Conditions are circumstances that must be met in order that the insurance cover be effective. A common example on a car insurance policy is the requirement that the policyholder maintains the insured car is in safe and roadworthy condition.

Hopefully this has made the prospect of reading your insurance documents a little less painful.

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