In Part 1 and Part 2 of this series, we introduced you to the various types of business insurance that can protect you and your business assets from unforeseen events. Now, let’s step back and look at how to navigate your insurance contract.
Congratulations! You studied your options, compared costs, and purchased your business insurance. Then, you downloaded the insurance policy from the website, or received a copy in the mail. Your curiosity got the best of you, and you glanced through the policy. And then, you set it aside, hoping you’d never have to actually read and understand what it says.
You probably did understand that an insurance policy is a contract between you and the insurance company. In exchange for the premium, the insurance company promises to investigate and pay claims on your behalf, and defend you against unfounded claims. You’re hiring an expert to have on-call 24/7, as it were.
To appreciate all that your on-call expert can do for you, why not take a closer look at your policy? There’s a special way of reading a policy. Unlike a novel, reading it through from beginning to end won’t give you the full picture of how the contract would be applied in a given situation.
There are general sections to an insurance policy, and they can be remembered with the mnemonic device DICED
. These sections are Declarations Page, Insuring Agreement, Conditions, Exclusions and Endorsements, and Definitions.
The Declarations Page contains the information you provided to the insurance company, upon which they relied in issuing you the policy. It also includes the dates for which the insurance contract runs, as well as a listing of the insurance coverage you purchased, the limits for each coverage, and any deductibles that would be applied.
The Insuring Agreement includes the agreement regarding the risks that the insurance company is taking on for you. There can be an insuring agreement for each of the various types of insurance you have purchased.
The Conditions section refers to a listing of your duties in the event of a claim. This includes the duty to cooperate with the investigation, for example. If you do not meet the applicable conditions listed in the policy, the insurance company may not be required to handle and pay the claim for you.
There is a list of Exclusions to which the insurance does not apply. This can be for a variety of reasons. One main reason is that the type of loss is better handled by a different policy. For example, your auto insurance excludes losses to your home, and your homeowner’s insurance excludes losses to your automobile. Another type of exclusion is for events that are so catastrophic that they cannot be insured. This generally includes floods or earthquakes. Th e government has stepped in to provide these types of insurance, with a very high deductible. This is seen as aiding the common good, but it is not feasible for a private company to fund such a program. Additionally, you cannot buy insurance for an intentional act. If you intend harm, it’s not an accident, and would therefore not be covered. The policy makes this clear by excluding such claims.
Endorsements are attached to the end of the policy. They change the coverage in the main policy in some way, usually due to recent changes in the law, variations from state to state, or upgraded insurance coverage.
The Definitions portion of the policy gives specific meaning to words used in the policy. You’ll oft en find these words in bold print or in quotation marks. When these words are used in the policy, they refer to the specific definition as given in this section of the policy. Take note that these words may be defined differently than the common usage in every day business. An example is the meaning of “Insured.” It can mean you, an officer of the company, or a spouse. It may also specify who is not an insured, such as an employee. Or, a person or entity could be an “Insured” in one instance, but not in another. And, even words within a definition are specifically defined, such as “You and Your.” It’s important to refer to the definitions to be sure you have a clear understanding of how to apply your insurance to a specific incident.
Applying your knowledge
Now to put this knowledge in practice, let’s say that someone slips, falls, and sprains his or her ankle while at your clinic. How would you determine whether this type of accident is covered by your policy?
You would start with the Declarations Page, being sure you have the right policy for the date and time of the incident, and that you have general liability coverage. You’d take note of the dollar amount of coverage you purchased.
Next, you would read the Insuring Agreement for the general liability section. You would note that the insurance company will “pay claims you become legally obligated to pay due to an accident or occurrence during the policy period, except as excluded by the policy.” Note that the insurance company will conduct an investigation to determine just that―was it your fault? If it was, they will pay the claim. If it was not, they will not pay the claim, and you won’t either. If the injured party continues to pursue the claim after that, the insurance company will pay to defend you against the claim.
About Resolute Michaels, NTP, BCHN
Resolute Michaels, NTP, BCHN® is the owner of Primal Perspectives. She is certified in nutrition by the Nutritional Therapy Association and the BioIndividual Nutrition Institute, and is Board Certified in Holistic Nutrition®. She and has a private clinical practice in Burien, WA and Federal Way, WA. Prior to becoming an NTP, Resolute spent 30 years as an insurance claims adjuster, handling bodily injury claims, as well as litigation involving policy language interpretation. She has earned the prestigious Certified Property Casualty Underwriter (CPCU) and Senior Claims Law Associate (SCLA) designations. She can be reached at email@example.com