Insurance definitions you need to know. I want to include a bit of information on a very important, but easily overlooked part of an insurance policy, the definitions. When defining the scope of coverage, insurance policies rely on terms and phrases that have specific meanings. The definitions are important as they establish the meanings of key terms in the policy.
WHERE TO FIND THE DEFINITION
Insurance terms and phrases are usually repeated many times in the insurance policy. A single definition of the term or phrase is included in the definitions section of the policy, instead of being repeated whenever the term is used. When a defined term is used in the insurance policy, it is indicated by placement within quotation marks or bold text. Since definitions may have a significant impact on the scope of coverage, they must be carefully reviewed when interpreting the policy's coverage intent.
WHY INSURERS USE DEFINITIONS
Insurers define words or phrases to limit their scope and serve as exclusions. Their goal is to prevent policyholders (and the court system) from interpreting terms more broadly than insurers intended. For example, the standard policy commonly defines an “insured” as the named insured shown in the Declarations, residents of the household who are your relatives, other persons under 21 and in care of any an insured or insured’s relative, or a student enrolled full time in school who is resident of the household before moving out to attend school.
UNDERSTANDING THE TERMS
Technically the term “insured” may exclude coverage to someone other than the persons listed previously. Therefore, it is important to refer to the definitions section when you see a term in the policy that is highlighted by quotation marks or bold text. For example, Medical Payments coverage can be extended to an insured who was injured while occupying a covered auto or by another person injured while occupying a vehicle being operated by an insured. “Occupying” is commonly defined as in, upon, or getting in, out, or off. Therefore, while some may think that coverage may not be extended to an insured who was injured while exiting a parked vehicle or even sitting on top of the vehicle, the definition section clarifies that coverage may be available.
As always, please refer to the specific policy in question. And anytime you see a word that is emphasized in the policy, refer to the definitions section for clarification.
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Disclaimer: These monthly blogs contain general information and may be subject to change. Policy language may vary by insurance carrier, so please refer to the specific policy in question. The Claims Advocate does not make any representations that coverage does or does not exist for any claim or loss and in no way guarantees coverage for claims.