How to Read Your Home Insurance Policy

When you file a claim, your insurance company turns to your policy.
This is because insurance policies are legally binding contracts between you and the insurance company. They dictate what your insurance company covers, how it pays claims and what you must do when filing a claim. When you file a claim, the policy dictates how the company is going to compensate you for your loss.

The following three tips can help you understand your policy and the insurance you are buying.

1. Read the whole thing
The best way to understand the insurance you are buying is to read your entire policy. You don’t have to do it all in one sitting, or even in the same day.
Pro tip: Break it up into small chunks; your policy is typically separated by the types of protection you are purchasing:

  • Coverage for your home and other structures on your property.
  • Coverage for increased costs of living while your home is being repaired.
  • Coverage for your personal possessions.
  • Coverage for liability (what you might owe to others for damage or injury due to your own actions or property ownership).

2. Read the definitions
Your insurance company will define the terms it uses throughout the policy. It is important to read these definitions because often times the definition used by the policy is different than what is used in everyday language.
Pro tip: Throughout most policies the defined terms will be marked in a way that makes them different from the rest of the type. For example they may be bolded, UPPERCASE or in “quotes.” Mark the definitions page so you can reference it as you read the policy.
3. Know what you’re reading
For each type of protection you are purchasing, your policy will explain the following:

  • Details of the coverage: This will explain all the ways that your policy provides coverage as well as what needs to happen to trigger coverage. For example, your dwelling may be covered only if you live in it.
  • Conditions of the coverage: This will explain what you need to do to file a claim and how your insurance company will settle a claim. For example, your policy may require you to protect your property from further damage.
  • Limitations and exclusions of the coverage: This will explain what types of loss are not covered or have limited coverage. For example, damage from a flood is likely excluded, or jewelry to electronics may have a limitation of just a few hundred dollars.

Pro tip: Make sure to read every word of your policy, including any special amendments to the policy. Sometimes a policy may provide coverage of a risk in one section only to later exclude or limit it under certain conditions. Use a highlighter to mark any sections of your policy that you would like to reference later. Afterwards schedule an appointment to talk about these sections with your insurance agent or company. Homeowner’s policies can be further tailored to through policy endorsements that address more specific needs of the insured.
For more information about Home Insurance read the Nevada Consumer's Guide to Home Insurance.