An insurance policy is more than just a financial tool that allows you to secure your assets and interests in case something untoward happens. It is a legally binding contract between the policyholder and the provider, wherein the former pays a regular premium to the insurance company (the latter). Then, under the agreed terms and conditions, the insurer compensates the policyholder in an event of a loss due to an unanticipated event. So you must read the fine texts and be familiar with the legalities involved upon enrollment.

Here are four legal details that you should take notice:

1. Product Disclosure Statement

This legal document benefits the would-be policyholder in a way that it gives a full description of the policy in plain English. The statement describes the features, benefits, risks, and costs in connection to the policy. This document should be made easy to understand so that, with sufficient information, you can compare policies. However, the attorneys from Farris, Riley & Pitt LLP, who handle settlements and claims, state that you should allow legal professionals to look into the provisions of an insurance policy, and they should be able to explain the product disclosure statement. Legally, the statement should tell you clearly the terms and conditions of the coverage from which you will be able to ascertain if the insurance covers everything that you need.

2. Conditions

Of course, insurance companies will not cover all of the losses, you will have to read the “conditions” of the policy as it qualifies the coverage provided. This legal detail is also very important since the basis of the legibility of your coverage will be derived from these statements. It describes events that insurers cover for the policyholder if such an event transpires. 

You will also find here how insurers will charge an additional premium following a fulfilled claim. The conditions will also outline the contractual obligations of the insured that needs to be followed to avoid forfeiture of the policy.

3. Exclusions

Exclusions in the policy must be reviewed properly before you sign the contract. Here, the insurance company should describe the provisions that void the coverage due to certain exposures. It should clarify any broadening of provisions and coverage granted by the company. 

4. Disclosure

Companies will have a set of tests to assess the property or the “risk” you want to insure. You will always be more knowledgeable than the insurer about your properties or the circumstances you’re mostly in. So you’re obligated to give accurate answers to the questions given during your application. Your answers to these questions will be critical if a time comes when you’ll have to file a claim. So it’s important to be concise with your answers without giving too many details to the insurer unless warranted. 

Many of the terms used in an insurance policy are legal jargon that can be unclear to an average person, so make sure you’re entering into one with a clear understanding of the agreement. Even when you’ve received your policy, you should still review its contents and see if it matches the one you’re looking to get. Insurance is a commitment between two parties, which should be fair and must be upheld by both.