Clause

What Does Clause Mean?

A clause refers to the financial responsibility of the insurance company to the policyholder as outlined in the contract. It specifies which types of losses the insurance company will cover. The policyholder can request a specific clause to be included while the insurance company or its representative drafts the policy.

Insuranceopedia Explains Clause

It is important for the insured to fully understand the insurance contract they purchase, as it outlines what they can expect to receive in the future. They must pay close attention to the clauses within the contract and be aware of all possible clauses they can request to be included. The clauses available can vary by insurer, so it can pay to compare the best homeowners insurance companies before settling on a policy.

For example, when buying property insurance, the insured should be aware of the potential risks that could damage the property. Many insurance companies do not include earthquakes as a covered peril. If the policyholder wants to ensure their property is covered for earthquake damage, they may need to add an earthquake clause to the contract. In most cases, standard homeowners policies do not cover earthquake damage, so buying a separate earthquake policy or endorsement is usually how that gap gets filled.