Common Policy Provisions – Telaclaims LMS

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When trying to understand policy provision you must first understand that all insurance policies are standard forms that are usually created by the Insurance Services Office (ISO) or American Association of Insurance Services (AAIS).

Provisions within the policy establish terms of the agreement, below we will examine some of the most common policy provisions you will see within most ISO or AAIS policy forms.

Cancellation and Non-renewal Condition:

This policy provision sets the rights of both the insurer and insured if either decides to cancel the policy, this provision typically states that

The policyholder can cancel at any time with notice while the insurers right to cancel is subject to the state insurance laws.
The insurer in most cases must provide written notice for cancellation or non-renewal, however, the insurer is usually permitted to cancel the policy with fewer days notice if the reason of cancellation is non-payment of premiums.

Liberalization Clause:

The liberalization clause in a policy states that if the insurer broadens policy coverage, that policies already issued must include this increase if the change was implemented during the policy period and did not raise the policy premium.

Representations Condition:

This clause of the policy states that policy coverage is based on information the insured provides to the insurer, and if the insured provides false information than the insurer can void the policy.

Concealment, Misrepresentation, and Fraud Conditions:

These policy conditions are designed to protect the insurer from the dishonesty of the insured by disallowing the insured to omit or misrepresent material facts. These could be things like a restaurant not telling the insurer that they sell alcohol or someone who smokes cigarettes not divulging that information to their health insurer.

Assignment Provision:

This provision in a policy makes the policy non-transferrable without expressed written consent of the insurer. The only exception to this provision in most cases is death, in cases of death coverage will usually transfer to the deceased legal representative of the insured.