How to read an insurance policy: A complete guide to essential terms
For many consumers, an insurance policy appears to be a complicated document filled with technical terminology and legal wording that is difficult to understand. In reality, most of these terms follow a clear logic, and once you understand them, they allow you to make informed decisions and avoid unpleasant situations when a claim arises.
In the Republic of Moldova, the right to receive clear and complete information is guaranteed by the applicable legislation, including Law No. 92/2022 on Insurance and Reinsurance Activities, which establishes insurers' disclosure obligations and policyholders' rights.
This guide explains, step by step, how to correctly read an insurance policy, which terms are essential, and what you should pay attention to before signing.
Glossary: Essential terms you need to understand
To correctly interpret an insurance policy, it is important to understand several basic terms. These appear in almost all types of insurance and define how the coverage works.
1. Sum insured
This is the maximum amount of compensation that the insurer will pay in the event of a covered incident. It is essential to verify whether this amount corresponds to the actual value of the insured property or risk. An amount that is too low may result in insufficient protection.
2. Insurance premium
This is the cost of the policy – the amount you pay to receive insurance coverage. It may vary depending on the risks covered, the deductible, the policy term, and other criteria agreed upon with the insurer.
3. Deductible
A deductible is the amount or portion of a loss that you pay out of your own pocket when a covered event occurs. The higher the deductible, the lower the policy cost may be, but you will bear a larger share of the expenses in the event of a claim.
4. Exclusions
These are situations in which the insurer will not pay compensation. They are clearly defined in the contract and should be reviewed carefully.
5. Grace period
This is the period during which the policy remains valid after a premium payment due date, even if the payment has not been made immediately.
6. Reinsurance
An internal mechanism through which an insurer distributes its risks to other insurance companies. This contributes to the stability of the insurance system.
7. Beneficiary
The person or entity that receives the compensation payment. In some cases, the beneficiary may be different from the policyholder.
8. Claim or loss
The event that triggers the policy and creates the right to compensation.
How to read the “Exclusions” section – the most important paragraph
If there is only one section of the policy that you choose to read with maximum attention, it should be the “Exclusions” section.
Many consumers focus on the price and the sum insured but overlook this section. In reality, exclusions define the actual limits of the coverage.
Common examples of exclusions include:
damage caused intentionally;
gross negligence or improper use;
failure to comply with contractual conditions;
risks that are not expressly included in the policy;
damage caused by war or military actions.
There may also be situations in which compensation is reduced or denied if contractual obligations are not fulfilled (for example, late notification of a loss).
To avoid problems:
read this section in full;
ask for clarification regarding unclear terms;
request specific examples of covered and uncovered situations.
How to read an insurance policy correctly, step by step
An insurance policy should be reviewed in a structured manner. Here is an effective approach:
Step 1: Verify the subject of the insurance What exactly is insured? The property, the person, the activity, or the liability?
Step 2: Review the covered risks Do not rely solely on the title of the policy. Check the exact list of risks included.
Step 3: Identify limits and sub-limits Some policies include different limits for specific types of losses.
Step 4: Check the deductible Understand how much you will pay in the event of a loss and under what conditions the deductible applies.
Step 5: Read the exclusions This is the critical step in understanding the actual scope of the coverage.
Step 6: Review your obligations For example:
reporting a claim within a specified period;
providing the required documentation;
complying with the conditions of use.
What to check before signing the policy
Before signing, it is recommended to use a simple checklist:
✔ Which risks are specifically covered ✔ What the main exclusions are ✔ What the sum insured is ✔ Whether a deductible applies and how it works ✔ The duration of the contract ✔ How the premium is paid ✔ What the claims settlement procedure is ✔ Where and how you can file a complaint
According to Moldovan legislation, insurers are required to provide complete and accurate information before the conclusion of a contract and must not mislead consumers.
Recommended sources of information
To verify information and make informed decisions, it is recommended to consult official sources:
Law No. 92/2022 on Insurance and Reinsurance Activities
National Bank of Moldova (NBM) – the supervisory authority
National Commission for Financial Markets – the authority with consumer protection competencies
These sources provide up-to-date information regarding the rights and obligations of policyholders.
Common mistakes you should avoid
To better understand the importance of reading your policy, here are some common mistakes:
Choosing a policy based solely on price
Ignoring exclusions
Misunderstanding contractual terms
Failing to review the claims settlement conditions
Not keeping documents and supporting evidence
Avoiding these mistakes can make the difference between a claim being paid and a claim being denied.
Conclusion: Your right to information as a policyholder in Moldova
An insurance policy is a contract that provides protection under specific conditions. Understanding those conditions is essential to benefiting from the actual coverage offered.
In the Republic of Moldova, you have the legal right to receive clear information, understand every clause, and make an informed decision. Reading your policy carefully is both a personal responsibility and a right guaranteed by law.