In this lesson, we’ll cover the general principles of insurance-policy interpretation. A separate lesson provides additional detail about interpreting unclear policy terms.

Assume a car owner bought an insurance policy that stated it covered direct losses to the car resulting from accidents. A tree fell on the car. The insurance company paid to repair the car. Even though the car was fully repaired, the car’s market value was less than if the car hadn’t ever been damaged. The owner argued that...