Policy Structure & Provisions
Every property and casualty policy shares a common structure and a set of standard provisions. This chapter covers the four basic parts of a policy, key conditions such as subrogation, and how coverage is bound and terminated. These provisions are consistent nationwide.
The Four Parts of a Policy
A property or casualty policy is built from four parts. The declarations page states the specific facts: named insured, description of the covered property or risk, policy period, limits, premium, and forms attached. The insuring agreement states what the insurer promises to cover. The exclusions state what is not covered. The conditions set out the rules and duties both parties must follow, such as the insured's duties after a loss. Endorsements can add, delete, or modify coverage.
Key Policy Conditions
Common conditions govern how the policy operates. Subrogation lets the insurer, after paying a claim, recover from the third party responsible for the loss, and the insured must not impair that right. The insured's duties after a loss include prompt notice, protecting property from further damage, and cooperating with the investigation. Appraisal provides a way to resolve disputes over the amount of a loss. Assignment of the policy generally requires the insurer's consent.
Binding and Terminating Coverage
A binder is temporary evidence of coverage, oral or written, that protects the insured until the formal policy is issued or the risk is declined. Coverage can end through cancellation (by insurer or insured during the term, subject to notice rules) or nonrenewal (declining to continue at the end of the term). Insurers must generally provide advance notice before canceling or nonrenewing, and the specific notice periods and permitted reasons are governed by each state's law.