Insurance 101: How You Should Read Your Insurance Policy

Contracts and agreements are always hard to read and even harder to understand. They can cause headaches and a ton of misunderstandings. To make sure you’re signing a contract that won’t be detrimental to you and your money, you have to learn how to read that contract right.

Here’s a guide to reading and understanding your insurance policy so you can avoid getting into something you might regret later on. We’ll show you 5 ways and describe each to help you out.


Annotate the policy form.

The first way to do this is by annotating. Think of this as studying your textbook. When students study, what they usually do is highlight and annotate because it can help them remember what lessons they should be learning and understanding.

Highlighting the contract can help you look at the most important parts of it and better understand the insurance policy.

Ask for help.

If it gets too difficult or stressful, you should ask for help. You can ask an insurance consultant or agent about terms you don’t understand or parts that are too confusing. You can ask for help from friends and family who might know what something means. Always remember that there is no shame in asking for help. Everyone needs to once in a while. So don’t be afraid.

Read the insurer agreement.

If you don’t know where to start, start with the insurer agreement. The insurer agreement is sort of like a summary of the insurance policy. This agreement appears in all types of insurance policies. And you must read this.

If there are terms you don’t understand, look them up.

In a contract, you inevitably come across a term you are unfamiliar with. If that happens, look it up. The internet will provide answers. Just make sure to read from trusted sites.

If some part of the policy refers to a different section, read that section immediately.

A lot of us procrastinate. But when it comes to this, you shouldn’t. When you go through the policy, you’ll notice that a lot of it will refer to something else. They might say “see…” or “based on…”. When it says something like this and it refers to another section, don’t put off reading that section immediately so you can see what they’re basing that part on.

This is a great trick to help you understand the policy you’re reading.


There are a lot of terms found in your insurance policy that will confuse you. And the sheer amount of it will overwhelm you. That’s what this guide is for. And we hope you find it helpful.

Insurance has many benefits and will continue to benefit you throughout your life if you choose the right plan and make sure you fully understand what’s under your insurance policy. Better understand your insurance policy by using the 5 ways we’ve shown you above. And enjoy a worry-free life.