Caveat Emptor - Let the Buyer Beware

When I was attending navy basic qualification courses for my specialty (logistics) a lot of the material was pretty heavy and frankly not very captivating.  To keep the class engaged and attentive, one instructor used to insert “action photos” (pictures of navy jets, warships, and submarines) into the presentation, as a mental break.  For this post, I am using that idea as inspiration and offering my version of an “action” item.  

Five things to look for or ask about when reviewing your insurance policies. 

An insurance policy is a legal agreement between you (the insured) and the insurance company (the insurer).  Understanding the contents of the agreement is the responsibility of you, the insured; caveat emptor.  But really, who has the time to read all of their insurance policies?  

To start here is a basic policy roadmap:

Declarations-Provides basic coverage and limit information

Insuring Agreements-Provides coverage details, such as the perils that are covered

Exclusions-Lists items that are not covered.

Endorsements-Lists changes to the policy

Policy Conditions-Provides the rules for the policy


The five pointers I am going to share will give you oversight without having to digest an entire policy.

1. Who is the insured(s) on the policy?
2. What are the coverage limits? Are they what you expected?
3. Have you met the policy conditions?
4. Are the endorsements you require or expect there?
5. What are the exclusions and the exceptions to the exclusions?

1. Who is the insured(s) on the policy? This is easy if your organization is the only insured listed on the policy and if there are not any dba or subsidiary affiliations. You should make sure the business entity and address are correct on the policy.  If you have several insureds listed, or if there are any dba or subsidiary relationships, you’ll want to be sure they are all listed and the names are correct.  The named insured, if only one, will be on the declarations page (first pages of the policy).  If there are many named insureds, there will be a named insured endorsement.  This endorsement is usually located at the beginning of the document.

2. What are the coverage limits? Are they what you expected? The coverages, limits, sub-limits, and deductibles are also usually found on the declarations pages.  In some cases, you may have contractual obligations that require you to carry certain coverage, limits or maximum deductibles.  You should make sure your policy meets the obligations.

3. Have you met the policy conditions? An insurance company will bind a policy on the condition the insured will provide certain documentation and/or meet certain requirements during the course of the policy.  You should understand these requirements and ensure you can meet them.

4. Are the endorsements you require or expect there?  The policy consists of insurance coverage defined by the agreement and the endorsements.  Every policy includes a list of endorsements.  You can scan the list to see where you should focus.  You’ll first want to focus on any endorsement that includes the word “exclusion” in the title.  After that you’ll want to focus on other key endorsements, depending on your operation.  A couple of endorsement examples are as follows:

Additional insured. These are insureds added to your policy in addition to the named insureds.  As we said above, your contracts may obligate you to add certain coverage to your policies and naming one or more additional insureds is a common requirement. 

Schedule of covered locations. You’ll find these endorsements when there is more than one location.  If you have only one location, it will most likely be shown in the policy declarations.  If you have multiple locations, you’ll want to review the endorsement to make sure all locations are scheduled.  In the event of a loss, the insurance company will review the schedule of covered locations to verify coverage.  If the location is not listed, there is a good chance the insurance company will deny coverage.

5. What are the exclusions and the exceptions to the exclusions?  You will find exclusions in the insurance agreement and also in the endorsements, discussed above.  In my experience reviewing exclusions has been the most difficult task to master.  In this case, your broker can be your friend and help explain any confusing concepts.  Some of the exclusions also list exceptions to the exclusions.  Remember in school those math class word problems “If a train leaves the station headed east at…” Deciphering policy language can be similar to figuring out those math problems. I often find it helpful to write down what is included, what is excluded and any exceptions to the exclusions to help understand what coverage is actually provided.

Reading an insurance policy can be quite daunting, but with the help of your insurance broker and remembering these five key points, you can feel more informed and confident about the coverage and limitations in your insurance policies. Caveat Emptor - Let the Buyer Beware!

Until next time, stay safe and be kind to one another.