Prime
What is an Insurance Policy?
What you need to know:
- It is a fact that a sizable number of buyers of insurance sign policies without understanding its terms and conditions and proceed to keep it only to produce it at the time of a loss
So, what is an insurance policy? The response is: it is the legal contract between the insurer (an insurance company) and the insured (a policy holder). It provides the evidence that you are insured, and is normally, also a legal requirement (in our case), that it be issued only after the payment of insurance premium, under the cash-and-carry. As a policy holder, it is important that you take time in reading and understanding the contents of the insurance policy. This will enable you to verify whether the policy meets your insurance needs. Furthermore, reading the insurance policy will help you to understand your rights as well as your obligations, also those of the insurance company.
It is important that you understand the policy document flow, and some of its key terms, conditions and terminologies which are basic standards commonly used in insurance policies. As a policy holder you need to understand and familiarize yourself with them. Therefore, in today’s article we will cover this, but some.
Title of the Policy: This section of the policy covers the class or type of the policy that you are taking, and it includes the registered name and address of the insurance company.
The Preamble: it sets out the necessary conditions that must be met by the parties before the completion of the insurance contract. It identifies parties to the contract, brief about the agreement itself, and the premium amount, it also refers you to the policy schedule, and any report or other document relating to the policy, policy terms and conditions, compensation upon the occurrence of the insured event and the sum insured.
Policy Schedule: This section outlines the type of policy taken; the policy number; your names, business, or profession; date of commencement of cover; period to be covered by the insurance; sums insured; premium amount and provision for signature of the insurance company’s authorized official. It also contains cover limits defining the highest benefits payable in case of a loss.
Definitions: This section only defines the terms used in the policy document. It is important to note that this section is very important as it is meant to guide you in understanding your policy. You are required to refer to it when reading the policy.
Policy Benefits: this describes the types of benefits the policy will pay in the event of a loss. These include benefits related to loss due to accidents, theft, burglary, illness, disability, and maturity benefits (in the case of life insurance) among others.
Policy Exclusions: The exclusions section covers the kind of risks that the insurance company is not prepared to cover under the policy. Examples may include riot, intake of illegal drugs and alcohol, war, etc. However, it is important to also note that some insurers may allow policyholders to buy back some of the exclusions by paying additional premiums.
Policy Conditions: This covers rules guiding the policy such as how to revive a lapsed policy, surrendering a policy, rules guiding policy loans, loss of policy document, duty of disclosure as well as policy cancellation and termination.
Signature and Attestation: it contains a place for signature of the insurance company’s authorized officer and the policyholder’s signature. You are required to sign this part of the policy only when satisfied with the policy. Normally you will be given some days, also known as the cooling off period, within which you can decide to sign or refuse to sign the policy.
It is a fact that a sizable number of buyers of insurance sign policies without understanding its terms and conditions and proceed to keep it only to produce it at the time of a loss. This is not healthy; and it actually is synonymous to using a driving license to which you have not appended your signature and whose expiry date you do not understand. Note that different policies have different terms, however, the ones highlighted here above are standard and common to most insurance policies.
