How Does an Insurance Policy Work?

When issued, an insurance policy is a legal contract between an insurance company and an insured according to the terms of the contract. As with any other insurance coverage, you pay a premium to the company in exchange for the insurance company's promise to pay for your covered losses. There is an expectation of good faith, i.e., that you and the insurance company will be fair and honest in your dealings with one another.

How Do I Obtain Coverage? Can I Ever Be Turned Down?

You should know that travel insurance is offered in a competitive market. You have the right to shop around for travel insurance from companies available in your area but a company also has the right to turn down your application for coverage.

In order to obtain a travel insurance policy, you must fill out an application to help the insurance company learn about you, your trip, and the risks the insurance company would be responsible for if they insure you. After reviewing the information, the insurance company will use its own standards, known as underwriting guidelines, to decide whether to issue you a policy, and the rate it would charge for the coverage.
If an insurer agrees to consider your application, the producer or company may issue you an "insurance binder", a legally binding statement indicating that you have immediate protection for a specified period of time during which the company will decide whether to issue you a policy. If the company formally accepts your application, it will issue a policy, usually covering the duration of your trip. If your application is rejected, you will need to apply to another insurer.

Can An Insurer Ever Cancel My Coverage?

Yes, an insurer can cancel or non-renew your coverage. You should read your policy carefully to determine the conditions for cancellation. Companies can cancel coverage, but only according to the conditions that are spelled out within the policy.

What Level of Coverage Do I Need?

You should only consider buying coverage up to the level of your need. If you are concerned about losing deposits on vacation homes due to a covered event, you will only want coverage for the total of the deposits, rather than for any other travel costs that you are not and will not be liable for. You should also only consider coverage if it does not duplicate coverage that you already have; you should check your other policies to determine what coverage you already have and whether travel insurance meets some needs not covered under any other policy.

How Do Insurers Market Insurance Policies?

Insurance companies generally use one of three methods to market their product: direct marketing, independent agents, or exclusive producers. The type of marketing method may or may not meet your needs, depending on the type of services offered. Therefore, you should be aware of each of the three methods and may want to consider these when you decide to buy insurance.
Travel insurance is sometimes sold by agencies affiliated with or through referrals from travel agencies. Such companies use direct marketers who sell insurance through the mail and by telephone. Some insurance companies sell coverage through producers that only represent their company. These companies call their producers an exclusive producer force. Independent producers represent several companies; therefore, you can get quotes for more than one company from just one producer. Many consumers consider this an advantage

How Do I Find Companies That May Sell Me Insurance?

There are many insurers licensed by the Division of Insurance that sell property and casualty policies in the Commonwealth of Massachusetts. In order to be licensed, an insurer must demonstrate it meets the state's minimum financial requirements to pay claims now and in the future. It must also agree to participate in the state's guaranty fund designed to protect policyholders if any licensed property and casualty insurance company is financially unable to pay claims. You can check for a list of companies in your area. When considering a company, you may want to contact your neighbors, relatives, and friends for recommendations regarding their insurance company's service and price. In addition, for a fee, you can learn more about the financial strength of a particular insurance company by contacting any of the following insurance rating services
A.M. Best Company(908) 439-2200
Duff & Phelps, LLC(212) 450-2800
Fitch Ratings(212) 908-0500
Moody's Investors Services(212) 553-1658
Standard & Poor's(877) 299-2569
Weiss Research Inc.(800) 289-9222