Policy Structure and Components

Every insurance policy follows a standard structure. Understanding these components is critical for interpreting coverage.

The Six Parts of an Insurance Policy

1. Declarations (Dec Page)

Purpose: Summarizes key policy information — who, what, when, how much.

Contains:

• Named insured and address
• Insurance company name
• Policy number
• Property or risk covered
• Policy period (effective dates)
• Policy limits (coverage amounts)
• Deductibles
• Premium amount
• List of endorsements attached

Exam Tip: The declarations page is like the "cover page" of your policy — it personalizes the standard policy form to your specific situation.

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2. Insuring Agreement

Purpose: The heart of the policy — describes what IS covered.

This is where the insurer makes its promise: "We will pay for..."

Two Types of Coverage:

Example - Named Perils:

• Policy lists: fire, lightning, windstorm
• Flood damages your home
• NOT covered (flood not on the list)

Example - Open Perils:

• Policy excludes: flood, earthquake, war
• Meteor damages your home
• COVERED (meteor not excluded)

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3. Exclusions

Purpose: Takes away coverage by describing what is NOT covered.

Common Exclusions:

• Flood — Requires separate NFIP policy
• Earthquake — Requires separate endorsement
• War and nuclear hazard
• Intentional loss — Fraud prevention
• Wear and tear — Normal deterioration
• Neglect — Failure to protect property
• Government action — Seizure, confiscation

Important: Exclusions can appear anywhere in the policy, not just in an "Exclusions" section. Always check endorsements for additional exclusions.

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4. Conditions

Purpose: Rules and obligations that both parties must follow.

Common Conditions:

Consequence: Failure to meet conditions can result in denial of a claim.

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5. Definitions

Purpose: Explains the exact meaning of key terms used in the policy.

Format:

• Defined terms are bolded or CAPITALIZED
• May have a separate "Definitions" section
• Some definitions appear within specific sections

Why Important: Insurance policies are "definition intensive." A word like "occurrence" or "bodily injury" may have a specific legal meaning different from everyday usage.

Example:

• "Bodily injury" in a policy might specifically include or exclude emotional distress
• "Occurrence" might be defined as one event or a series of related events

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6. Endorsements (Riders)

Purpose: Written modifications that add to, delete, or change the original policy.

Functions:

• Add coverage — Earthquake endorsement, scheduled jewelry
• Remove coverage — Exclude specific perils or property
• Modify terms — Change deductibles, limits, conditions
• Correct errors — Fix mistakes in the policy
• Update information — Address changes, add vehicles

Critical Point: Endorsements are part of the contract and override conflicting language in the base policy.

Exam Alert: When determining if something is covered, ALWAYS check endorsements — they can significantly change coverage.

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Reading a Policy: Priority Order

When interpreting coverage, review in this order:

1. Endorsements (most recent first)
2. Declarations (specific to this policy)
3. Definitions (understand the terms)
4. Insuring Agreement (what's covered)
5. Exclusions (what's NOT covered)
6. Conditions (what's required)