Lesson 3 of 3 · 5 min read
How to read an insurance policy without getting lost
Three sections really matter in a policy: what it covers, what it excludes, and how a claim is made. The rest is usually detail.
An insurance policy looks intimidating because of the amount of text, but in practice three sections hold the essential information for your decision.
- What exactly it covers: not just the general category (“home”), but the specific risks listed and the maximum compensation for each.
- The exclusions: the situations for which NO compensation is paid. This is the most often ignored section and the most important to read carefully.
- The claims procedure: the deadlines and documents needed to make a claim, and any excess (the sum you pay yourself, out of your own pocket, before the insurance covers the rest).
The excess changes the calculation
A policy with a low premium but a high excess can actually be more expensive in practice than one with a slightly higher premium but a low excess. It depends on the real risk you are exposed to.
If a term in the policy isn't clear, explicitly ask the agent or insurer to explain it in plain words, in writing if possible. A policy well understood before signing prevents unpleasant surprises at exactly the moment you need cover the most.
In short
- The three essential sections: what it covers, what it excludes, how a claim is made.
- The excess can completely change the cost-benefit calculation of a policy.
- Ask for written clarification of any unclear term before signing.