The declarations section is a broad overview of the insurance policy. It contains the insured’s name and address as well as the contact information for the insurer. It further includes the dates that the policy is effective for, the amount and type of insurance coverage being provided, the amount that the insured must pay in premiums, any discounts being applied, and any applicable deductibles.
Depending on the type of insurance being offered—for example automobile and property insurance—the declarations section should also describe what is being insured through either a property description or a list of covered items. If the policy includes endorsements (discussed below), they should also be listed in this section.
In a contract, words are given their ordinary meaning unless they are specifically defined within the contract. Insurance agreements often include extensive definition sections which help to specify exactly what is covered under the agreement. For example, many automobile insurance policies provide coverage for the vehicle listed on the policy in addition to other “covered autos.” Covered autos often include “temporary substitute autos.” A classic example of a temporary substitute auto is a rental vehicle while the primary vehicle is being repaired or while on vacation but only if the rental is for less than 30 days. If the rental is for more than 30 days, it may fall outside of the definition of a temporary substitute auto and may not be covered. Understanding the definitions of the terms within a contract agreement is crucial to understanding what coverage an insured is paying for.
The insuring agreement provides a more complete statement of the coverages that were set out in the declarations section. Insurance agreements can be broken into two categories, named-perils and all-risk. A peril is a cause of loss, for example fire or theft.
Named-perils coverage specifically lists the types of perils that are covered under the policy. If a peril isn’t named in a named-peril insuring agreement, the insured is not covered against that type of peril. For example, if a named-peril policy does not specify vandalism as a covered peril then the insured is not covered from damage caused by vandalism. This type of policy puts the burden of proof onto the insured to demonstrate that a claim was caused by a covered peril.
All-risk coverage lists the types of perils that are excluded from the policy. If damage occurs for any other reason than one specifically listed, it is covered. A common type of insurance that uses all-risk coverage is a life insurance policy. Because all-risk coverage is more broad than named-peril, it typically has higher premiums. This type of policy puts the burden of proof onto the insurer to prove that a claim was caused by an excluded peril.