Insurance policy structure

Insurance policies have a particular structure and it is good to know what they comprise of. Let’s look at home insurance policies and how they are structured.

Insurance policy structure in the past

In the early days, most insurance contracts are based on the types of risk and a separate premium is calculated and charged for each of these risks. But this structure was not sustainable and by the twentieth century the large companies which had come in being had to insure against multiple risks.

By the 1940s, the insurance industry had shifted to the present system where covered risks are defined broadly in the insuring agreement and then narrowed down by the exclusion clauses. This means that if the insured party wishes coverage for risk taken out by exclusion on the standard form, the insured will have to pay an additional premium for endorsement to the policy which then overrides the exclusion.

Parts of an insurance policy

So what does the parts of the insurance contract consist of? First come the declarations which identify the insured party, address, the insuring company, what risks or property is covered, the policy limits or the amount of insurance that you are taking out, any applicable deductibles, the policy period and the premium amount.

The insurance policy will define the important terms used in the policy document. The agreement will describe the perils which are covered, the risks assumed or nature of cover or will make a reference to the agreement between the insurer and the insured.

For instance, if your home is located in an area which is prone to natural disasters like flooding and high winds, your premiums will be higher. So if you plan to take out a home insurance and you want to be sure, check the Environment Agency website which has a map. The best information comes from the insurance companies itself. You can get this data at

The agreement will contain exclusions which will list out perils, hazards or loss from specific causes which are not covered by the policy. Make sure that you read the conditions thoroughly: that is the provisions, rules of conduct, the duties and obligations required for the coverage. Remember that if the conditions are not met your claim will be denied.

The insurance policy will also have endorsement which are additional forms attached to the main form which may modify some condition. This portion is difficult to read for people without a legal background. These endorsements modify or delete clauses which are mentioned in the earlier pages so it is not advisable for a person which no legal training to directly rewrite the core policy language. While most insurance companies pay out the claims, sometimes there are reasons why they don’t. It may seem unfair but it could be that these losses were just not covered by the insurance.

For instance, if your answer to the safety of your locks is incorrect, some insurance companies will not pay.

Further reading