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Insurance Bureau of Canada/ab/Insurance 101/Insurance Basics/Buyer Beware - Read your policy carefully

Buyer Beware

​​Informed buyers carefully review their insurance policy and policy limits. Know what to look for when reviewing all sections of auto, home or business policies.

5 Tips When Reviewing Your Insurance Policy

An insurance policy is a contract between you and your insurance company. When you buy or renew your auto, home  and/or business insurance, take time to:

  1. Ensure the name and address of the insured individual or business is accurate. A policy cannot be transferred to another person. While typically a new application is required for issuance of a new policy, exceptions do exist.
  2. Ensure coverage is as required and that the limits are adequate.
  3. Check the location(s) listed to ensure they are accurate.
  4. Ensure the insurance company is properly identified.
  5. Read the conditions carefully. Many policies require the insured individual or business to comply with all policy conditions before claiming on the policy. Clarify any words that are unclear or undefined in the policy. Look up unclear words in a dictionary to understand their common meaning. If the word has more than one common meaning, ask your insurance representative how it applies to your policy.

Utmost Good Faith

Insurance contracts rely heavily on the information the insured individual or business provides. Deliberately misstating or excluding important information, or neglecting to inform the insurer of changes, could result in denied claims and policy termination.

How to Read An Insurance Policy

Here are the four sections you can expect to see in an insurance policy:

​​Declaration​Insuring agreements​Policy conditions​Exclusions and special limits
  • ​What risks are covered – a list of coverages purchased
  • Policy limits – limits of insurance, and deductibles  purchased
  • The amount of premium due
  • Others who have an interest in the policy (e.g., mortgage holders, lenders)
  • A list of form numbers and endorsements that add to or alter the policy
  • ​What losses are covered
  • The subject matter of the insurance and description of the property covered
  • The perils insured against – circumstances when the insured may receive the proceeds of the insurance
  • For a claim to be valid, it must be covered under the insuring agreement and not  stated as an exclusion

​Requirements the insured must fulfill to maintain coverage:

  • If the insured breaches a condition, the policy can become  void or the insurer may refuse a claim arising out of the breach
  • Statutory conditions that  the insured or insurer must comply with
  • Understand how the law affects your policy

​Certain property and perils are excluded from coverage.

Other insured property may be insured up to a Special Limit.

Understand these exclusions and limits to avoid disappointment after a loss.