This is the biggest mistake most people make. When your insurance representative gives you the policy papers, often all you do it glance over them. It’s time to learn more about your policy, and what your restrictions are if you pay thousands of dollars a year on insurance. It is important to have an advisor who will help you understand the confusing terms. However, it is also vital that you fully comprehend your contract. This article will help you understand your insurance contract and the key principles behind insurance legal agreements.
1. You will receive the offer letter from the insurance company. After you have completed the information, you will be asked to mail your forms to the broker (possibly along with a premium check). This is basically what you are doing. When the insurance company accepts you’re offer and agrees, it is called acceptance. After some modifications are made to your offer, the insurance company may agree to cover you. Once you have been provided with the latest terms, you have every right to modify it and return it. Even though this can be time-consuming, you should get it right from the beginning and take some extra time if disaster strikes.
2. Understanding Under-Insurance Your insurer will only pay a small portion of $80,000 during partial loss. You’ll need to use your savings to cover the rest. This is called under-insurance. You should really avoid it.
3. Know your excess: Insurance companies have established conditions such as excess in an effort to reduce the risk of making trivial claims. Let’s assume that your excess on motor vehicle insurance is $5,000. Your insurer will pay $7,000 to you if your automobile accident results in a loss of $7,000 above the $5,000 limit. However, if the loss exceeds $3,000, the insurance provider will not pay you any money. You will have to pay the entire $3,000. Important to remember is that indemnity agreements may not be available for all insurance contracts. An example of this is the fact that nearly all legal papers relating to accident and life insurance are non-indemnity.
4. An additional, but unique scenario is that you purchase life insurance policies of $1 million. This does not mean your life has been valued at $1,000,000. It’s difficult to determine your net worth and put a price tag on your life so an indemnity agreement will not apply.
5. What is “Insurable interest”?
Insurance is your legal right to insure any property or event that could cause financial loss or create an obligation to you.
Bottom line
Nearly everyone can rely on an insurance specialist when selecting insurance. This includes picking the right policy for them and filling out the application forms. While most people try to avoid the boring legal terms associated with insurance agreements, it is important to be familiar with these terms and phrases in order to fully understand the terms and conditions of the policy you are purchasing.
