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What should I look for when reading my general insurance policy?

The Insurance Institute of Canada recommends asking the following eight questions when reading an insurance policy:

  • Who is covered?
  • Which property is covered?
  • What are the conditions of coverage? (continuance of coverage, process in the event of a loss)
  • What are the extensions of coverage? (automatic, optional)
  • Which perils are covered? (earthquake, cyclone, etc.)
  • Where does coverage apply?
  • What are the exclusions?
  • Are there other issues to consider?

General insurance has several common clauses:

  • coinsurance: Coinsurance clauses refer to the amount of the loss that the insured retains and is designed to encourage the insured to carry adequate insurance.
  • loss payable: Parties other than the insured may have an interest in the property insured (e.g. banks). If loss occurs, payments are made jointly to the insured and the loss payees.
  • mortgage: Mortgagees are responsible for notifying the insured if the property is vacant more than 30 days, if there is a change of ownership and if the probablility of hazard increases. If the insured has violated a policy condition, the insurer is still liable to the mortgagee but can either pay the loss to the mortgagee or buy out the mortgagee.
  • deductibles: The insured is responsible for losses up to a certain limit in return for a lower premium.
  • subrogation: The insured pays the claim and pursues recovery against a responsible third party in the name of the insured.
  • termination: Insurers must give a number of set days notice before canceling a policy. Notice of such a cancellation must be written and delivered by hand or registered mail. Pro rata premiums must be returned. If the applicant does not disclose relevant facts, the policy can be deemed void.
  • loss adjustments: The process of settling claims is outlined (claim submission, assignment of adjuster, damage assessment, completion of proof of loss by the insured and issuance of cheque).