Understand Your Insuring Agreement

Is an Insuring Agreement All Greek to You? Here’s a Simple Explanation!

Every insurance contract—regardless of its subject matter—is a legal document signed between the insurer and the policyholder. The purpose of insurance contracts is to provide protection from or compensation for loss or harm.

An insuring agreement is a crucial aspect of your insurance contract, and you should know what it details and why it’s important.

What Is an Insuring Agreement?

An insuring agreement is a section of an insurance contract that outlines the exact risks that an insurance company agrees to cover. In exchange for the insurance coverage, a policyholder makes premium payments to the insurer at a specified amount and interval.

Another important part of the insuring agreement is the one listing the exclusions—the type of risks that aren’t eligible for the insurance coverage. This list helps the policyholder understand the specific areas that their coverage extends. The coverage is usually broad, and the exclusions and definitions in the insuring agreement narrow it down.

Insuring Agreements—More Relevant Definitions

Dealing with insurance contracts can be tough. You have to know many legal phrases if you want to get the best out of your deal and honor the terms set in the agreement to the best of your abilities.

Check out the table below to learn what essential terms in insuring agreements mean:



Coverage Insurance coverage is the amount that an insured is paid in case of unforeseen events as compensation for their loss
ExclusionExclusions involve loss, events, or risks that the insurer will not provide coverage for
PremiumAn insurance premium is an amount that the insured pays the insurer in exchange for the coverage. Policies that cover home, life, auto, and healthcare insurances are paid through premiums

Why Is an Insuring Agreement Important?

As much as an insurance company tries to specify what risks or liabilities warrant coverage, disputes can still arise. Insuring agreements are important when conflicts arise over whether the insurer has to cover a certain loss.

When a policyholder issues a lawsuit, both parties can use the insuring agreement to interpret its terms and exclusions. These interpretations are competing.

What Are the Main Elements of an Insuring Agreement?

Insuring agreements have five important sections:

  1. Declaration
  2. Insuring Agreement
  3. Exclusions
  4. Conditions
  5. Miscellaneous Provisions

What Does the Declaration Section Cover?

The declaration is the first part of an insuring agreement, and it identifies the:

  • Policyholder
  • Insurance company
  • Subject matter
  • Amount of insurance
  • Insurance start and end date
  • Amount of premium

What Is An Insuring Agreement Section?

The insuring agreement is the most important part of the contract. In it, the insurer states what loss or damages they agree to cover. If the insurance contract has more than one subject matter, the insuring agreement needs to cover all of them.

What Are Exclusions?

In the Exclusions clause, the insurance company lists the type of loss or damage it will not cover. Usually, this includes:

  • Damages caused by specific perils, usually caused by illegal activities
  • Losses that are covered by other insurance companies
  • Specific uninsurable losses

What Are Conditions?

The Conditions clause specifies the duties the insured has to fulfill before and after the loss or damage. For example, they have to make due payments to be eligible for coverage. The Conditions also state the activities the policyholder needs to do to prevent damage. If an unforeseen insurable event occurs, the insured needs to eliminate any further damages.

What Are Miscellaneous Provisions?

The Miscellaneous Provisions determine the working procedures for upholding the terms of the entire insurance contract. Together with the other four sections of the insuring agreement, they complete the contract between the insurer and the policyholder.

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Popular contracts DoNotPay can create include:

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