Insuring agreement
An insuring agreement is the section of an insurance policy that states what the insurer promises to cover: the covered risk or event, who is covered, for what period and the basic duties on each side. It is the starting point for any claim, but limits, the deductible, exclusions, definitions, conditions and endorsements decide the final payment.
Also called: insuring clause
The insuring agreement is the insurer's core promise. It tells you which losses, events or benefits the policy is built to respond to. The NAIC (opens in a new tab) describes it as a broad statement listing the perils and risks covered under the contract. On its own, though, it does not tell you what a claim will pay, because the rest of the policy limits, defines and conditions that promise. To use it, find the coverage section that matches your loss and read it alongside the limit, deductible and exclusions.
How the insuring agreement fits into a payment
The insuring agreement decides whether a loss is the kind the policy covers. The numbers on the declarations page and the other policy sections decide how much is paid. The New York Department of Financial Services (opens in a new tab) gives a homeowners example with a $150,000 dwelling limit and a 5% hurricane deductible.
Hover or tap a row to highlight it.
| Item | Amount |
|---|---|
| Dwelling limit | $150,000 |
| Hurricane deductible (5% of $150,000) | $150,000 × 5% = $7,500 |
| Covered hurricane damage | $10,000 |
| Insurer payment | $10,000 − $7,500 = $2,500 |
| Your share | $7,500 |
That result assumes the loss is covered, the limit is high enough and all policy conditions are met. The insuring agreement establishes that hurricane damage is a covered peril; the deductible, exclusions, conditions, valuation rules and endorsements produce the $2,500. These are the DFS figures, not a national average or a prediction for your policy.
Choices that change what the promise is worth
Several policy choices sit around the insuring agreement and change the result of a claim.
- Named perils or open perils. A named-perils policy covers only the listed causes of loss. An open-perils policy covers causes of loss unless excluded, which is broader, but the exclusions still control, according to the NAIC (opens in a new tab). Flood and earthquake damage are excluded under a standard homeowners policy.
- Limits. Higher limits raise the most the insurer can pay and may raise the premium. Homeowners personal property coverage is often 50% of the dwelling limit, other structures 10% and loss of use 20%, according to the NAIC home insurance guide (opens in a new tab), though a policy can use other percentages.
- Deductibles. Common standard choices in New York are $250, $500 and $1,000, and windstorm and hurricane deductibles there commonly run 1% to 5% of the dwelling value, according to the New York DFS (opens in a new tab). Hurricane deductibles range from 1% to as high as 10% in some coastal states, according to the NAIC (opens in a new tab).
- Actual cash value or replacement cost. Actual cash value generally subtracts depreciation; replacement cost pays to repair or replace with similar materials, which generally means a higher payment and may mean a higher premium.
- Endorsements. An endorsement can add, remove or change coverage, limits, deductibles, definitions, exclusions or conditions, and it becomes part of the legal insurance agreement, according to the NAIC (opens in a new tab).
Where you will find it in a policy
Auto policies have an insuring agreement for each part, such as liability, collision, comprehensive, medical payments and uninsured or underinsured motorist coverage. Homeowners, condo and renters policies use one for property, liability insurance, medical payments and loss of use. Life policies state the death-benefit promise and the policy owner's main rights there. Business policies, including general liability, commercial property, businessowners, professional liability and commercial auto, have their own. Health and pet policies may call it "covered services," "benefits" or "coverage."
It usually comes after the declarations page and sits near the definitions, exclusions, conditions and endorsements. The declarations page lists your limits, deductibles, covered property, dates, premium and endorsements. Exclusions remove or limit coverage, conditions set duties and procedures, and endorsements modify the policy. A quote summarizes proposed coverage and price and is not necessarily the contract; a binder may give temporary coverage until the policy is issued, according to the California Department of Insurance (opens in a new tab). A claim letter may quote the coverage grant, an exclusion or a condition when explaining a decision.
How Connecticut and New York shape it
Connecticut writes the insuring language for fire policies into law. The standard form insures "against all DIRECT LOSS BY FIRE, LIGHTNING AND BY REMOVAL FROM PREMISES ENDANGERED BY THE PERILS INSURED AGAINST IN THIS POLICY," under Conn. Gen. Stat. § 38a-307 (opens in a new tab), and fire policies on Connecticut property must conform to that form, subject to statutory exceptions, under Conn. Gen. Stat. § 38a-308 (opens in a new tab). The same standard form requires proof of loss within 60 days after the loss unless the time is extended in writing.
In New York, a policy form generally cannot be delivered until it has been filed with the Superintendent and approved, or 30 days have passed without disapproval, under N.Y. Insurance Law § 2307 (opens in a new tab). Neither state makes every insuring agreement identical; each policy's own exclusions, conditions, limits and endorsements still apply.
Questions to ask an agent or insurer
- What exact loss, peril, event, service or death benefit does this insuring agreement cover? That identifies the coverage trigger before anything happens.
- Which exclusions, definitions, conditions or endorsements could limit it? The insuring agreement is never read alone.
- What are the limit, deductible, valuation method and any sublimit? These set your share and the most the insurer will pay.
- Does the declarations page correctly show the coverage, limit, deductible, policy period and endorsements we discussed? Errors are easier to fix before a loss.
- What notice, proof-of-loss, cooperation, repair or filing deadlines apply after a claim? Conditions can require prompt notice, proof of loss and cooperation.
Frequently asked questions
Short answers to common questions about this part of a policy.
Is the insuring agreement the same as the declarations page?
No. The declarations page lists your policy-specific details, such as limits, deductibles, dates, premium, covered property and endorsements. The insuring agreement describes the underlying promise those numbers apply to.
Does the insuring agreement mean my claim is covered?
Not by itself. The loss has to fall within the coverage grant and must not be removed by an exclusion or limited by a definition, condition, deductible, sublimit, valuation rule or endorsement.
What is another name for an insuring agreement?
"Insuring clause" is the common alternative, and the New York Department of Financial Services (opens in a new tab) lists "insuring agreement or clause" as part of policy structure. Some policies say "insurance agreement" instead.
Does a policy limit mean the insurer pays that amount?
No. A limit is the most available, not an automatic payment. The covered loss, deductible, depreciation, valuation method, sublimits and claim conditions still apply.