How To Read A Commercial
Insurance Policy (Explanation & Directions)

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Learn how to read a commercial insurance policy. Most people find business insurance policies difficult to read as they are long, written in legal ease and very complex. This article is a quick guide to help you better understand your commercial policies.

How To Read A Commercial Insurance Policy

How To Read A Commercial Insurance Policy

If you've never seen an entrepreneur that has refused to get the needed commercial insurance policy because he feels that the fine print is too technical, then you have not known a lot of entrepreneurs. And, if you are one of those businessmen who have refused to get the necessary insurance policy because you think you can't read and understand the policy, then this is the post for you. Today, we will enlighten you on the best process of reading any commercial insurance policy.

The fact is that no business owner enjoys reading a document of up to 300 pages (maybe that's a bit of hyperbole). But the need to do take your time understanding the policy surpasses the stress you will ever go through to do so. Now, because these policies are written in a style that is different from that of your favorite dime store novel, you need to approach the content a bit more thoroughly. This will help you determine the perimeters of the coverage. So then how to read a commercial insurance policy? In order to navigate through any commercial insurance policy, you have to follow the steps we are listing below.

Get The Right Copy

How to read a commercial insurance policy? The way to start reading the commercial insurance policy is to get the rightful copy of the policy first. This would mean a certified copy from the carrier. You can also confirm that the copy you have is accurate by comparing the form number and the endorsements lined up on the copy's declaration page with the number and content of the pages of the insurance policy.

From the form numbers, you may be able to find the edits and their dates. These dates should also be compared to what you have on the actual pages of the policy, to make sure they match. The edition dates you have on the form numbers on the declaration page should also be compared to the actual dates of the policy. If these do not match, you do not have the accurate copy.

Read The Copy

Every commercial insurance copy will come with some basic parts, and it will be easier for you to read the policy when you read according to these parts. They include the declaration, the conditions, the perils that are insured against, and the exclusions, in that order. You might also check out our insurance terms and defintions guide to look up unfamiliar terms.

Declarations

Start with the declarations, which is always the first chapter. Here, you should search for who is insured by the commercial policy, the risks covered, the limits of the policy and the dates of coverage. You will also see the insurance firm's full identity, and then the form numbers and endorsements.

To know who the people or persons that qualify as part of the insured by the policy, look at the declaration page or in the coverage form. You will see a section that is titled 'Who Is Insured'. Make sure that the right parties are insured so that you are getting coverage that actually works for who and what you need it to. There may also be some additional insured parties, but these may also appear at the endorsements section.

Conditions And Insuring Agreements

This is the next section to look through after understanding the declarations. The insuring agreement is the portion of the insurance policy in which the insurer promises to make payment to or on behalf of the insured. Here, the conditions that the insured must satisfy, so as to be eligible for the coverage will be listed in detail. In some cases, they will come with the tag "General Conditions", while in some others, they will be named "Conditions Applicable to Entire Policy".

This is one of the most important parts of the commercial insurance coverage reading. How to read a commercial insurance policy? If you fail to understand and meet any of the conditions here, you may be denied the claim you make in the future, even when it seems valid. In some other cases, the processes for a claim will also be listed here.

From here, you get to the insuring agreement section, where it will state the promise to make a certain amount of payment on behalf of the insured if the conditions listed above are met. This agreement section is normally very broad. It is only in the next chapters that the exclusions and further definitions of what is meant here are given.

Exclusions And Definitions

An exclusion is a policy provision that removes coverage for a certain type of risk. Exclusions narrow the scope of coverage provided by the insuring agreement. This is where you will read the things that are excluded from the coverage and why they are excluded. It gives specific definitions of what is meant in the broad insuring agreement above.

Now, after the exclusions, you also need to read further to see if there is a space for exceptions to these exclusions. This may come under the exclusions with or without special labels. Here, the level of control the carriers have on the amount of coverage they are offering is laid out. Read it well. Your bank account may well depend on it.

Endorsements

This is the section that either removes or adds elements to the policy itself. They are amendments or additions to an existing commercial insurance contract which changes the terms or scope of the original policy. Make sure to read it clearly and compare anything here to the rest of the policy that you have already gotten to know. Otherwise, you might be in for some surprises.

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