Insurance is Difficult — Understanding Insurance Terms and Conditions

You’re reading this because you have questions about an insurance policy you’re either thinking about buying or have already bought. You shouldn’t feel bad that you don’t understand everything that’s in the policy. The things are designed to be difficult.

Insurance has never been a simple matter. Ever since the earliest days of the modern insurance industry, when merchants would pool their assets at places like Lloyds of London to protect against their individual cargoes being lost at sea, disputes over what’s insured and what’s not have filled countless claims offices and courts of law.

Insurance companies even the best ones would rather not pay claims. They try to structure things so that they make money even when they have to pay, but settlements eat into their profits. So, most companies try to create a corporate culture of stinginess. They promote claims managers with low settlement averages and actuaries who can structure premium schedules that squeeze that maximum coverage out of every insurance dollar.

If you invest in an insurance company, these moves sound like good management. If you’ve made a claim against insurance company, it can seem like an infuriating evasion of responsibility.

Many people who make claims and then get infuriated sue the insurance companies they think should be paying. (Attorneys like to take lawsuits against insurance companies and will often do it on contingency, because the companies have lots of money and get little sympathy from juries.)

Unfortunately, many people sue without really understanding why the insurance companies are resisting coverage. When they sue on these insurance terms, they usually get shot down before they ever get to court.

What consumers seldom understand is that insurance policies are contracts. Terms are negotiable; therefore, courts strictly enforce terms to which policyholders have agreed whether or not they ever knew they could have demanded better insurance terms and conditions.

That’s where you need to do your homework by learning, exploring, and understand insurances before you buy them. You’ll find explanations and annotations of the seven basic kinds of insurance that people buy. The objective is a simple as giving you a good working knowledge of what standard policies cover, what they don’t and in either case why.

This background should help you understand insurance terms and conditions better. This understanding should help you negotiate better coverage.

You might hesitate at the notion of negotiating your own coverage. Insurance agents have traditionally played that role in the insurance-buying process. In the past, most consumers went to an agent, discussed their needs and waited to hear a quote.