What is the insuring clause in an insurance policy?

What Does Insuring Clause Mean?

The insuring clause is an integral part of any insurance contract and one that all insureds should pay close attention to. The insuring clause is the section of an insurance policy that outlines the risks assumed by the insurer. In other words, this clause details exactly the risks the insurer is liable for paying and defines the scope of the coverage.

Although it is called an insuring clause, it is actually more likely a collection of clauses for all the different perils, losses, and additional coverage an insurer is offering you in the insurance policy. For example, on a typical home insurance policy, your insurance clauses might state that you have coverage for:

  • Dwelling Building.

  • Detached Private Structures.

  • Personal Property.

  • 3rd Party Liability.

  • Defense Costs & the Right and Duty of the Insurer (to defend you from liability claims)

When you receive a copy of your policy wordings from your insurance company, you should make sure you understand the insuring clause(s) to grasp what is and is not covered by your policy and for how much.

If you have questions about any of the terms contained within, you should contact your insurance provider for clarification. The last thing you want is to find out you do not have coverage for something when you have a claim because by then, it is too late.

Insuranceopedia Explains Insuring Clause

The insuring clause(s) are one of the most critical components of an insurance contract and forms its foundation. It outlines the major guarantees and protections offered by the insurance company and states what is covered. That is why it is so critical for you to understand this part of the policy and to communicate with your insurance provider for clarity if there are any areas you are unsure about.

Put another way, this clause outlines the role the insurance company has agreed to perform as part of the contract. Examples include paying for certain losses arising from insured risks, providing certain agreed-upon services, providing defense for a lawsuit subject to certain conditions, and other agreements that form part of the insurance policy protections you are paying for.

For example, in a life insurance policy, the insuring clause states the main purpose of paying out a specific amount in a death benefit to the named beneficiary after the death of the insured.

In this context, it would include the insurer’s name, the face value payable, and the insured’s name. In more complex policies, the insuring clause(s) section might also include information on the causes of death that are accepted and any limitations (if any) that might apply under different scenarios.

An insuring clause is a part of insurance policies that defines how much risk will be taken on by the insurance company.3 min read

1. Basics of an Insuring Clause
2. What's Involved in an Insuring Clause Agreement?
3. Insuring Clause Exclusion
4. Conditions of an Insuring Cause

An insuring clause is a part of insurance policies that defines how much risk will be taken on by the insurance company.

Basics of an Insuring Clause

Insurers take on a certain amount of risk when providing an insurance policy, and the risk the company assumes is stipulated in an insuring clause. These clauses are usually included in liability insurance policies and property insurance policies. Their main purpose is dictating how losses will be divided when there are multiple policies in place.

These provisions vary from case to case, and the amount of loss that is apportioned depends on the language of the policy. In some cases, no coverage is provided, and in others, the different insurance companies share the loss evenly. Insuring clauses are used to prevent a profit from a loss that is insured, which is required by the indemnity principle. In simpler terms, these provisions describe the liability of an insurer and outline how much coverage they are required to provide.

Insuring clauses are one of the building blocks of an effective insurance contract. When this provision is inserted into an insurance contract, the insurer is agreeing to fulfill their duties as described in the contract, including:

  • Offering lawsuit defenses
  • Covering risks by paying for any losses that occur
  • Providing any and all services that are outlined

In life insurance policies, for example, the insuring clause will state that the insurer is required to pay a certain amount to the listed beneficiary upon the death of the policyholder.

In these circumstances, the clause would include the name of the insurer, the name of the insured, and the amount that is payable to the beneficiary.

What's Involved in an Insuring Clause Agreement?

There are several issues included in an insuring clause, including a description of legal liability, meaning the amount that the insured will need to pay if a claim is made against the insured. These claims can include:

  • Acts of negligence, including omissions and errors
  • Slander or libel
  • A breach of confidentiality that is unintended
  • Acts that are considered criminal, dishonest, fraudulent, or malicious

Insuring clause agreements also describe the legal expenses and costs that will be covered by the insurer to defend the insured against a claim. These expenses can include damages awarded after the policyholder loses a lawsuit. These clauses also include a provision for loss of documents, whether they have been destroyed, misplaced, or simply cannot be obtained by the insured.

Insuring Clause Exclusion

To protect the insurance company, insuring clauses almost always include exclusions. It's important for the person purchasing the policy to understand these exclusions before entering into the contract. For example, most insuring clauses exclude coverage for issues that were known at the time the contract was agreed upon. There may also be exclusions when the policy holder has another policy that entitles them to indemnity.

Virtually every insuring clause includes an exclusion for acts by the insured that are considered malicious or dishonest. This exclusion can also apply when there is reasonable suspicion that fraud or some other crime has been committed. If the insured is fined or penalized or is required to pay non-compensatory damages after a lawsuit, these issues will also be excluded.

Conditions of an Insuring Cause

For an insurance policy to be valid, there are conditions that must be met that are listed in the insuring clause. For example, when the policyholder intends to file a claim, they are required to immediately notify the insurer. The policyholder must also alert the insurer to any circumstance that could possibly lead to a claim.

When notifying an insurance company of a possible claim, the policyholder must provide the insurer with several important pieces of information:

  • The name of the person that may file the claim
  • Details about the circumstance that may result in the claim
  • An act or omission that the policyholder believes will result in legal liability

Another common condition in an insuring clause is that the insured should not admit responsibility or attempt to settle claims on their own with the express permission of the insurer. Insurers have the right to take over the settlement of a claim on behalf of the policyholder, although this is not required.

If you need help understanding the insuring clause, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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What does an insuring clause include?

The insuring clause states the very purpose of the life policy; it outlines the conditions under which the policy will pay. If the insured dies, the insurer promises to pay the beneficiary the death benefit as laid out in the policy.

What is the insuring clause quizlet?

Insuring clause. The insuring agreement or insuring clause states that the insurer agrees to provide life insurance protection for the named insured which will be paid to a designated beneficiary when proof of death is received by the insurer.

What are the 4 parts of an insurance policy?

Most policies consist of four parts: declarations, insuring agreements, conditions, and exclusions. Since any insurance provider can do business and present the policy to the insured, those pieces may be arranged in a different order than listed here.

What are the 3 essential elements of an insurance contract?

Because the law of contracts is used to interpret an insurance policy, the basic elements of contract (offer, acceptance, and consideration) must be present for a court to uphold an insurance agreement.