Few people read their insurance policy and even fewer understand what it actually covers. It can seem like the blind are leading the blind when trying to determine what is and what is not included. Insurance commercials focus on savings and say that you will have to pay for damage out-of-pocket if you have an inexpensive policy, but none of them tell you how to recognize a policy that doesn’t give you adequate coverage.
What if understanding the ins and outs of your policy could be as simple and memorable as reciting “Three Blind Mice,” albeit with a slightly modified ending?
Three blind mice. Three blind mice.
Read all the parts. Read all the parts.
There are five parts in the policy.
It’s easy to remember, you’ll see.
Just look for the sections which spell clearly,
Find the DICE. Find the DICE
Understanding Your Policy With DICE
Policyholders must first grasp the basic tenant that an insurance policy is a legal document between them and the carrier. The reason the insurance contract baffles the average consumer with its notoriously dense legalese is because words matter. The carrier has to be precise in their language to explain what is and is not covered. Breaking down the policy into more digestible chunks can clarify the contract, making it bearable and, sometimes, even straightforward.
The three blind mice must read the entire policy, which introduces an easy-to-remember acronym: DICE, which stands for Declarations Page and Definitions, Insuring Agreement, Conditions, and Exclusions/Endorsements.
D: Declarations Page and Definitions
The Declarations Page is the who, what, when, where, and how much of your policy. It includes your name, the property insured, the policy term, coverage limits, and your premium. Think of it as the executive summary of your policy; it outlines the essential details at a glance.
Remember the insurance contract is a legal document. The Definitions section of the policy clarifies the meaning of terms used throughout the document. This section is your dictionary for words that have a special meaning. You will know if a word has a special meaning in the policy because it is usually bolded or in quotes.
I: Insuring Agreement
The Insuring Agreement details what the insurance company agrees to cover in exchange for the premium you pay. The carrier may provide coverage as an ‘exception to an exclusion,’ instead of being directly stated in the insuring agreement. That coverage is in the Exclusion section of the policy. Sometimes, the definitions include language that can either expand or limit the scope of coverage. The conditions of the policy can restrict your ability to file a claim, even if the contract appears to offer coverage. Basically, the combined effect of all the policy terms and provisions determine which losses are covered.
C: Conditions
Conditions are the rules of the game. This section outlines the responsibilities of both the policyholder and the insurance company. It includes the steps you must take when a loss occurs, how disputes are resolved, and the procedures for canceling the policy. Ignoring the Conditions can lead to the denial of your claim.
E: Exclusions/Endorsements
Exclusions list what the policy does not cover. Understanding these limitations is necessary to knowing the full scope of your protection. Endorsements, on the other hand, are changes to the policy that can modify coverage, terms, or conditions. Together, Exclusions and Endorsements fine-tune your policy to fit your specific needs and circumstances.
Rolling the DICE
With the DICE framework in mind, reading your insurance policy becomes a far less intimidating task. However, because the policy is a legal contract, it is not possible to read it like a book. To understand a policy, think of it like a website in which you must click on various links and tabs to get the full story. This method emphasizes a systematic approach allowing you to understand each part’s role in the grand scheme of your coverage.
1. Start with the Declarations Page: Review this page for accuracy and familiarize yourself with the coverage summaries. This gives you a solid foundation before moving forward.
2. Decipher the Definitions: Ensure you understand the terms and phrases used. This makes the rest of the policy more accessible and less confusing. Remember that language matters, and words like “except” or “unless” can change the coverage.
3. Analyze the Insuring Agreement: Pay close attention to what is covered. There are more than one Insuring Agreement in a policy. Each Insuring Agreement will only apply to losses which pertain to that specific coverage. This is the heart of your policy, and understanding it is key.
4. Review the Conditions: Know your responsibilities in the event of a claim.
5. Examine the Exclusions and Endorsements: Be aware of what is not covered and how your policy has been customized. Endorsements can also exclude, or limit, coverage. Carriers can amend endorsements and add them to your policy when it is renewed. You should review your policy yearly to see if your coverages have changed. This helps manage expectations and avoid surprises in the event of a claim.
The Benefits of an Insurance Policy for a Manufacturing Company(Opens in a new browser tab)
In the End
Reading an insurance contract can seem overwhelming, but insurance, at its core, is quite simple. The policy is a legal contract between you and the insurance carrier. It is this contract that the adjuster reviews when you file a claim. Using the DICE method not only helps you understand the policy, but also ensures you are well-informed about your coverage and rights.
By Chantal M. Roberts
Chantal M. Roberts, CPCU, AIC, RPA, is a self-described insurance nerd with over 20 years of experience as a multi-lined claims adjuster. She is also an award-nominated author who has previously written two books, one for mid-career adjusters, The Art of Adjusting: Writing Down the Unwritten Rules of Claims Handling, and a creative nonfiction story about Molière, A Love Story: How the Heartland Fell in Love With a 400-Year-Old French Comedic Playwright. Her new book, Once Upon A Claim: Fairy Tales to Protect Your Ass(ets) (May 11, 2024), provides consumers with a better understanding of property and casualty insurance and claims.
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