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Insurance Policies for “Dummies”

ins.PNGAmber recently graduated from college, and, for the first time, could support herself financially. While she was vaguely aware about the importance of insurance during college-her enrollment required health insurance, after all – the process of shopping for the best policies – and learning what those policies provided, was unknown to her. She planned on simply buying the cheapest options and letting the rest take care of itself.

But her good friend got into an accident on a motorcycle and found out it wasn’t covered by his automobile insurance. One simple error resulted in a loss of thousands, and Amber knew she didn’t have that much money to spare. She knew she had to take insurance seriously, but the challenge seemed daunting.

Insurance policies are not the easiest things to read and understand. Like other important legal documents, they can be long, convoluted, and unapproachable. But there are many advantages to making the most of the policy, either by closely reading the paperwork or getting the help of an insurance agent (a salesperson hired by a company) or a broker (an independent insurance salesperson).

At their most basic level, insurance policies ease the financial sting of major accidents, such as car crashes, house fires, and sudden health problems. Nearly all policies have a declaration (describing the basic details of the policy), coverage list (describing what the policy protects against), exclusion list (describing what the policy doesn’t protect against), limitations (describing the extent of coverage), and conditions for coverage (describing the duties of the policyholder). They may also offer additional coverage.

Policy holders should, at the very least, learn those details, so that they can get the coverage they need. Researching the market on your own, or working with an agent or broker, can also help determine what plans work best for you. For instance, choosing between term and permanent life insurance (and the various subtypes between them) makes a big monetary difference depending on your health and the type of dependents that may be involved.

Like all complicated documents, many of the finer points of insurance policies are hidden in hard-to-find corners of the language. Those who have a deep understanding of how their insurance policy works are better equipped to fully take advantage of those tiny, often overlooked details. For example, camping trailers can be cheaply covered under most car insurance policies. Also, many homeowners’ insurances offer rate discounts for having burglar alarms installed. While these “loopholes” may seem small by themselves, they can add up to big savings. No affordable insurance policy offers perfect protection, but it’s to every policyholder advantage to make their insurance work efficiently for every dollar they spend. Loree Varella, Rutgers School of Law Newark candidate for a JD degree in May 2016 collaborated with me on this blog. She is Associate Editor of the Rutgers Computer and Technology Law Journal and Managing Research Editor of that publication.

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