1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions
Key Takeaways
- Policy structure follows DICE: Declarations, Insuring Agreement, Conditions, Exclusions.
- The Declarations page is the personalized who/what/when/how-much summary including limits and deductibles.
- Named perils require the insured to prove the cause; open perils require the insurer to prove an exclusion.
- HO-3 gives open perils on the dwelling but named perils on personal property — a classic trap.
- Split limits like 25/50/25 separate per-person BI, per-accident BI, and property damage; a CSL pools them.
The Standard Policy Architecture ("DICE")
Most ISO-based property and casualty policies follow the same skeleton. A common memory aid is DICE: Declarations, Insuring Agreement, Conditions, Exclusions. The exam expects you to identify which part a given clause belongs to.
| Component | Purpose | Examples of contents |
|---|---|---|
| Declarations | The "who/what/when/how much" page — usually page 1 | Named insured, mailing address, policy period, covered property, limits of insurance, deductibles, premium, forms/endorsements list |
| Insuring Agreement | The insurer's core promise to pay | Broad statement of covered perils/causes of loss and covered interests |
| Conditions | The rules both parties must follow | Duties after loss, cancellation, proof of loss, appraisal, subrogation, other insurance, assignment |
| Exclusions | What is NOT covered | War, nuclear, intentional acts, wear and tear, flood/earth movement (on most HO forms), governmental action |
On an ISO Homeowners policy, the section that lists the named insured, policy period, coverage limits, and deductible is the:
Named vs. Open Perils — the Burden-of-Proof Trap
The insuring agreement sets the trigger of coverage, and there are two structures the exam contrasts constantly:
- Named perils (specified perils): covers only perils listed in the policy (e.g., the HO-2 Broad Form, DP-1 Basic). The insured must prove the loss was caused by a listed peril.
- Open perils ("all-risk" / special form): covers all direct physical loss except what is excluded (e.g., HO-3 on the dwelling, HO-5, DP-3, the Causes of Loss – Special Form CP 10 30 in commercial lines). The insurer must prove an exclusion applies to deny the claim.
This burden-of-proof shift is a favorite exam point: open-perils coverage is broader and puts the proof burden on the insurer.
Common ISO Forms and Editions You Should Recognize
You will not memorize every form, but recognize the major names and what triggers them:
- HO-3 (Special Form) — open perils on Coverage A/B dwelling and other structures; named perils on Coverage C personal property. Most common homeowners form.
- HO-5 (Comprehensive Form) — open perils on both dwelling and personal property.
- HO-4 — renters/tenants (contents only); HO-6 — condo unit-owners.
- DP-1 / DP-2 / DP-3 — Dwelling Property Basic (named, ACV), Broad (named, RC), and Special (open perils) forms.
- CP 00 10 Building and Personal Property Coverage Form; CP 10 30 Causes of Loss – Special Form (commercial).
- CA 00 01 Business Auto Coverage Form; CG 00 01 Commercial General Liability (occurrence form).
Exam tip: HO-3 mixes coverage triggers — open perils on the structure, named perils on contents. Questions exploit this split.
Under an open-perils (special form) policy, when a claim is filed, who bears the burden of proof?
Endorsements, Limits, Sublimits, and Deductibles
Endorsements (riders) modify the base policy — adding, deleting, or changing coverage — and an endorsement always controls over conflicting language in the base form. Limits of insurance cap the insurer's payment; watch for sublimits (e.g., the HO special limit of $1,500 on jewelry theft, $2,500 on business property).
Deductible structures also appear:
- Flat (straight) deductible — a fixed dollar amount subtracted per loss.
- Percentage deductible — common for wind/hurricane and earthquake, expressed as a percent of the dwelling limit (e.g., 2% of $300,000 = $6,000), so it is far larger than a flat deductible.
- Split-limit liability (auto) — written as 25/50/25: $25,000 bodily injury per person / $50,000 BI per accident / $25,000 property damage. A combined single limit (CSL) instead provides one pooled amount for BI and PD together.
DICE in Practice — Where Each Part Lives
The acronym DICE organizes every property-casualty policy, and the exam asks which part contains a given provision:
| Part | Contains | Example |
|---|---|---|
| Declarations | The "who/what/how much" facts | Named insured, address, limits, deductible, premium, policy period |
| Insuring agreement | The core promise to pay | "We will pay those sums the insured becomes legally obligated to pay..." |
| Conditions | The rules both parties follow | Duties after loss, cancellation, subrogation, appraisal, other insurance |
| Exclusions | What is not covered | War, intentional acts, wear and tear, flood/earth movement |
Many forms add a Definitions section (defined terms appear in bold or quotes) that controls the meaning of words throughout the contract. When a question hinges on whether a loss is covered, the order of attack is: read the insuring agreement (is it within the grant?), then the exclusions (is it carved out?), then any exceptions to the exclusions (is it carved back in?), and finally the conditions (did the insured comply?).
Endorsements, the Entire-Contract Rule, and Conflicts
An endorsement (or rider) is an amendment that adds, deletes, or modifies policy terms; it always controls over conflicting language in the base form. The entire contract consists of the policy plus the application and all endorsements — the insurer cannot rely on outside documents that were not made part of the contract.
When provisions conflict, the exam applies a hierarchy: handwritten beats typed, typed beats printed (preprinted form), and a specific endorsement beats the general form. Coverage sublimits (a $2,500 cap on jewelry theft inside a larger limit) and special limits of liability further restrict otherwise-covered property, so a homeowner with a $250,000 contents limit may still recover only $1,500 on stolen jewelry unless it is scheduled by endorsement. Recognizing these layering rules lets you answer "how much is paid" questions that combine a base limit, a special limit, and a deductible.