General Insurance Policy Analysis
To ascertain the protection given by an insurance policy, the following questions must be answered:
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Is the peril covered?
A policy may cover only specific perils or may be a comprehensive policy.
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Is the property covered?
The policy usually defines the property being insured, and those that are excluded. In motor car insurance, for example, accessories that are not factory-fitted are not covered unless specifically indicated in the policy.
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Is the type of loss covered?
Losses can be classified into (a) direct - the physical loss of the object; (b) consequential - as in loss of income resulting from loss of use of the damaged property; and (c) extra-expenses losses - such as defending a lawsuit and paying the judgment, medical expenses following accident or illness, and cost of temporary facilities until the damaged property is restored.
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Is the person covered?
Most policies cover only the named insured, while other policies include even the insured’s family as in some accident insurance plans.
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Is the location covered?
Some policies cover one location only, as in ordinary fire insurance; others include off premises coverage.
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Is the time period covered?
Most policies are issued on an annual basis; others for less than one year; some policies are issued for more than a year. Furthermore, policies vary as to the time of day they are effective. Fire policies take effect at 4:00 o’clock in the afternoon, Manila Standard Time; most other policies at 12:01 in the morning on the date they are in effect.
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Are there hazards that exclude or suspend coverage?
Some policies have provisions designed to suspend or exclude coverage when the hazard is increased. For example, motorcar policies suspend coverage if the vehicle is used for car racing.
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What is the amount of coverage?
Most policies have limitations which establish the maximum amount the insurer will pay for a loss. Some policies have deductibles while others have specific clauses (as in average clause) that reduce the amount of liability under certain.