Parts of An Insurance Contract
- Declarations - identifies who is an insured, the insured's address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount. These are usually provided on a form that is filled out by the insurer based on the insured's application and attached on top of or inserted within the first few pages of the standard policy form.
- Definitions - define important terms used in the policy language.
- Insuring agreement - describes the covered perils, or risks assumed, or nature of coverage, or makes some reference to the contractual agreement between insurer and insured. It summarizes the major promises of the insurance company, as well as stating what is covered.
- Exclusions - take coverage away from the Insuring Agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.
- Conditions - provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not met, the insurer can deny the claim.
- Endorsements - additional forms attached to the policy form that modify it in some way, either unconditionally or upon the existence of some condition. Endorsements can make policies difficult to read for nonlawyers; they may modify or delete clauses located several pages earlier in the standard insuring agreement, or even modify each other. Because it is very risky to allow nonlawyer underwriters to directly rewrite core policy language with word processors, insurers usually direct underwriters to modify standard forms by attaching endorsements preapproved by counsel for various common modifications.
- Policy riders - A policy rider is used to convey the terms of a policy amendment and the amendment thereby becomes part of the policy. Riders are dated and numbered so that both insurer and policyholder can determine provisions and the benefit level. Common riders to group medical plans involve name changes, change to eligible classes of employees, change in level of benefits, or the addition of a managed care arrangement such as an Health Maintenance Organization or Preferred Provider Organization (PPO).
- Policy jackets - A policy jacket is a cover, binder, envelope, or presentation folder with pockets in which the policy may be delivered. Historically, standard boilerplate provisions common to an entire family of policies were often printed on the jacket itself; then the underwriter would type up the declarations form and insert that form along with insuring agreement and endorsement forms into the jacket to assemble a complete policy. They are increasingly rare because jackets do not feed through automatic document feeders and must be manually copied or scanned in order to produce a complete image of the entire policy text.
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