6 Important Contract Parts
I’m an insurance agent in West Chester, OH. I have almost forty years of insurance experience. I was recently explaining the homeowner insurance policy to a client and it reminded me of the way I taught the same thing to new agents. Some years ago I was teaching insurance to prospective insurance agents seeking their first license with the State of Ohio and deconstructed the homeowner insurance policy so that they might better understand the 6 important parts that are a part of every policy.
To help my students understand policy construction I described the home insurance policy as consisting of six essential parts and provided the acronym D-D-I-C-E-E. These six parts exist in every homeowner insurance policy. This simple acronym helps break down the major components of the home insurance policy so that it was more easily understood. This is way I describe all insurance policies to help the clients of Insurance Associates Agency Inc. I like to use this simple outline to explain coverage. Anyway, the better you know what your homeowner insurance policy is built and constructed, the better you’ll be able to tailor your protection to your needs.
The six important parts of every home insurance policy:
- Insuring Agreement
What does it mean: All 6 Parts Explained Here!
- Declaration – Personalizes the policy to each customer with their name, address, policy number, coverage amounts, endorsements attached, and similar things unique to the insured.
- Definitions – The meaning of important words used in the policy language and endorsements. This is the meaning the company relied upon when writing their policy.
- Insuring Agreement – Also sometimes called the “Agreement”, specifies the coverage provided in exchange for the premium paid, and compliance with the conditions in the policy.
- Conditions – Sometimes referred to as the rules of the coverage. Conditions are usually things that you must do in order for a loss to be sustainable and payable by the carrier. A common example of a condition in the policy includes “Your duties after a loss.”
- Exclusions – These are things that your coverage will not cover. All policies contained exclusions. The carrier will exclude property they are not covering and the causes of loss they are not covering. For example, “Intentional acts” are not covered.
- Endorsements – An endorsement may add or subtract protection. Some endorsements occur to help the policy language comply with law in the state where you live. This might be referred to as an “amendatory” endorsement. Others add coverage for special types of losses or property.
Policies Vary – Here’s Some Reasons Why
Every homeowner insurance policy is constructed with the six essential parts I have already covered. You will find the policies of various insurers to be different for other reasons. You’ll find home insurance is similar from one company to another but you need to pay attention. Where policies will vary is in the language and the language is key. There are many reasons the effect of the language makes coverage different when it comes time to collect on a claim. Policies from state to state will vary too because of state laws. It is also true that each company adjusts and modifies the language in their policies to comply with changing laws and interpretations handed down by Courts. Language adjustments are eventually codified and written into the policy language to reflect the experience of the insurer, whether or not they won the court case or lost.
Language and words are known to have many meanings. That is the reason important words are defined in the policy to create clarity for you and the company. As an example, consider the word “dog”. The word dog can be both a Verb and a Noun and that means their is at least two different meanings. Policy writers need to include the meaning of a word as it applies to insurance coverage. Defining the important language carefully helps make the coverage more reliable and less subject to unintended meanings after a loss occurs.
Some of the largest insurance companies have enough accumulated customers and have enough experience under their belt that they can write their own policy language. They don’t usually stray far from what is being used by other carriers. That said, relatively few insurance carriers can afford the legal expense of tracking, researching and writing their own policies. Most companies subscribe to a service like the Insurance Services Office (ISO).
The ISO tracks requirements, researches and writes structural policy language for carriers to use as the foundation for their policy offerings. They also provide other services including helping companies set rates. The ISO aggregates the collective experience of millions and millions of policies and keeps a record of the experience to guide the organization and their subscribers in making wise policy and management decisions about the homeowner policies they offer. This includes coverage endorsements, exclusions, and amendatory endorsements required to tailor policy wording for the various places a company may operate. You may find that the insurance carrier you buy homeowner insurance from uses an older version of the policy than might be current. Policy versions may or may not reflect It should be sufficient to say that nothing about providing home insurance is as easy as the six important policy components. It is merely the beginning.
You should also be aware that the coverage – mostly described within the Insurance Agreement section– may provide more comprehensive protection than the coverage carried by another person. The most common homeowner policy is the HO-3 policy form. It provides named peril coverage on the personal property and special form coverage on the dwelling structure itself. A peril and causes of loss are topics better left for another day!
Ohio residents can get a homeowner insurance quote quickly and easily by clicking on the link. Of course, I am available to help answer your questions. Contact Terry McCarthy for more information. The office is open Monday through Friday from 9-5 except on holidays. I am available for consultation at almost any time of the day with advance arrangements including evenings and on weekends. My office is located at 8114 Paul Manors Dr. in West Chester, OH. Contact information is also found on the agency website. There is also a contact us form for your use by following the link.