What Are the 5 Parts of an Insurance Policy?

The insurance policy documents contain the basic details of your policy. They explain the terms and conditions of your policy and are a point of reference for you and your insurer regarding coverage, exclusions, rules and claims procedures. While these policies are essential to read, they are not always easy to understand. Here, we've broken down the five parts of an insurance policy so you can better understand yours.

Why you should review your insurance policy

An insurance policy is a legal contract between the insurer (your insurer) and the insured (the insured). Legal contracts are not famous for being fun to read, but reading and understanding your entire policy ensures that you have the necessary and expected coverage under the conditions you assume. Being an informed insured can also avoid disagreements between you and the insurer if you need to file a claim.

The 5 parts of an insurance policy

Declarations page

The declarations page is also called the “December page,” although it can have more than one page. It summarizes the main details of your policy and is the first part you will find. Must include:

  • The type or name of the coverage provided.
  • Policy details, such as period, policy number, and premium.
  • Names of people and assets covered (if applicable).
  • The dollar limits coverage and its corresponding deductibles.
  • A list of the endorsements included in the policy or their total number.
  • Discounts applied to the policy.


The "Definitions" section defines common words, restricts their meanings, and helps avoid ambiguities that could work against the insurer in court. Common words may have limited definitions in a specific insurance contract. Defined terms are also listed throughout the policy in special formatting such as italics, bold, and citations to show that they have special definitions. In general, words that are not defined are open to interpretation, but defined words should be carefully reviewed for inclusions and exclusions from coverage.

Insurance Contracts

Insurance contracts are normally the main part of the policy. They define who and what is covered by the policy and what the insurer promises to do and not to do in exchange for your premium. This can mean paying the costs of personal injury, property damage, and legal defense up to the policy limits in a covered car accident. You may see an Insurance Contract listed under "Policy Coverage" or another name that indicates what your coverage is about. Each part of the coverage can have its own Insurance Contract.

Insurance contracts generally provide a broad overview of the scope of coverage and then narrow it down in the Exclusions and Definitions sections. It is important to read these three sections together to get a better idea of ​​exactly what is and is not covered so that you know you have the coverage you are expecting.

Exclusions and limitations

The Exclusions section generally follows the Insurance Contracts and lists what your policy does not cover. For example, homeowners policies generally exclude damage caused by hazards like floods and earthquakes. Auto policies can exclude wear and tear damage. Policies may provide a section for exceptions to exclusions, to avoid having to list all possible exclusions and coverages.

Policy limits are listed on the declarations page and describe how they apply under "Limits of Liability." The limitations list the maximum dollar amount or percentage of the total loss (or a combination) that can be reimbursed under the policy in a given claim or period, such as $ 500,000 to rebuild your home after a claim, or $ US 1 million annually in total. Legal procedures performed under a small business insurance policy.


The Conditions section includes the provisions of the policy that qualify or limit the promise of payment or performance of the insurer. This means that if you do not meet the conditions established here, the insurer can reject your claim. One condition you may see in a homeowners policy is protecting your property after a loss to prevent further damage, or allowing the insurer to inspect a fire damage claim before repairs begin. Some other conditions may be related to the rights of subrogation, notification and settlement of losses or cancellation and non-renewal.

Please note the language that is absolute (such as "always" or "never") or inclusive ("and" or "or") in your policy. Requiring you to report a car accident to the police and insurance company within 24 hours is different than having to report it to the police or insurance company, for example.

The bottom line

Insurance policies give you the peace of mind that you are protected in the event of a loss. It's essential to make sure you understand your contract so that you can be sure your premium covers what you expect it to do and you can proactively close coverage gaps. While knowing the five parts of an insurance policy can increase your overall understanding of your individual coverage, your insurance agent can review the complexities of your policy with you so that you can fully understand it and make adjustments if necessary.

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Source: Shine Insurance

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