An insurance policy is a contract between the insurance company and the insured. Under this contract, an insurance carrier agrees to pay money to the insured in the event of a covered loss. A covered loss is a loss that the insurance carrier has agreed to protect the insured against in the event of its occurrence.
For example, in an automobile policy there are many “covered losses” that the insurance policy may protect against. Under the line of coverage known as “collision coverage,” the insurance carrier will pay to repair the damage done to your vehicle in the event it is involved in an accident. Automobile policies may also carry coverage known as medical payments. This coverage will reimburse a passenger or driver of the vehicle for medical bills they have incurred if they are injured in an accident.
There are two very important things to remember when reading an insurance policy. The first is to clearly identify what covered losses are part of the policy. Remember, an insurance carrier has no obligation to provide coverage for a loss that is not covered. One of the most frequently excluded areas are claims that allege an intentional act. For example, an insured owns a homeowners’ insurance policy. The insured gets into a fight with a visitor and injures the person who brings a lawsuit against the homeowner claiming he was intentionally injured.. If the insurance policy has exclusion for intentional acts, there will be no coverage for this loss.
The second area that must be read carefully is the limit of coverage. The limit of coverage is the maximum dollar amount the insurance carrier will pay in the event of a loss. For example, an automobile insurance policy may have medical payments coverage of $1,000.00. This means the insurance policy will pay up to $1,000.00 for medical bills sustained by a driver or passenger in the event of an accident. There is no obligation to pay for medical bills beyond the $1,000.00 limit. You may also see in an automobile policy a section for liability coverage that reads, for example, $100,000.00/$300,000.00. This means that the event the insured causes an accident, the insurance carrier will pay $100,000.00 for each injured person or $300,000.00 maximum for that accident, whichever is less.
Let me repeat that insurance policies are contracts. When a person purchases an insurance policy they are assumed to have read the policy on a “more than casual basis”. The fact insured was unaware that a term or condition was part of the policy or failed to read that term or provision will not invalidate it. If you have any doubts as to the scope of coverage or limits of coverage of any insurance policy that you own, you should speak with an insurance professional or an attorney.
Andrew J. Piela is a Director at Hamblett & Kerrigan, P.A. Mr. Piela concentrates his practice in civil litigation, family law, probate and land use litigation. You can reach Attorney Piela by e-mail at [email protected].