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Watch Out for the Exclusions in Your Insurance Policy

While most of us believe that insurance covers potentially any circumstance/condition, there is a lengthy laundry list of events/ conditions that insurance companies do not cover. These are explicitly stated and labelled ‘Exclusions’.

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Updated:December 7, 2017, 11:18 AM IST
Watch Out for the Exclusions in Your Insurance Policy
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Being insured, whether it be life or car, health or house, has become a necessity in order to avoid going out of pocket in case of emergencies. With the rising cost of living, safeguarding your dependents’ futures though taking out an insurance plan is the best way to provide for them.

Besides covering you in case of any unforeseen circumstance, taking out an insurance policy also helps from a tax-saving standpoint. Individuals can benefit from deductions on income tax payable through investing in an insurance policy up to a certain limit.

Insurance policies are now a dime a dozen in the market, with both private as well as PSU players muscling in for a bit of the action. The huge potential given the country’s vast population and catering to diverse insurance needs has resulted in a variety of policies. You can literally shop around for the right insurance policy or even get one tailor-made for your needs (subject to certain limitations, of course).

While most of us believe that insurance covers potentially any circumstance/condition, there is a lengthy laundry list of events/ conditions that insurance companies do not cover. These are explicitly stated and labelled ‘Exclusions’.

Why Does My Insurance Have Exclusions?

Exclusions are a way for insurance companies to clearly define and narrow the range of cover offered. With the literature attached to an insurance policy usually quite broad in scope, an exclusion helps to define exactly what the insurer will cover and under what circumstances the coverage will be provided.

Usually, risks that are not covered are ones that the insurer has no power over, such as acts of war.

Any deliberate harm caused by the insured party to either himself (in case of life insurance) or insured property is excluded across insurance segments.

Illegal activities undertaken by the insured or using an insured property is also excluded, such as property damage or injury when not following safety guidelines (such as in case of vehicles).

There are also times insurance exclusions arise mid-policy, in response to administrative decisions or policy changes. These are then added to the cover and the policy is modified as a result.

Where Do I Find Policy Exclusions?

Most policies mention a list of exclusions in their policy document under a heading titled ‘Exclusions’ or ‘Policy Exclusions’. Directives by the Insurance Regulatory and Development Authority of India (IRDAI) have made it compulsory for insurance companies to state exactly what they cover and what is excluded, so policyholders are aware of what they will receive compensation for. The circumstances around which the insurer will cover the damage is also stated.

In addition to the policy document, the digital age has made it easier for a potential policyholder to look through a policy’s exclusions online. All companies that offer policies online have their list of policy exclusions mentioned.

Common Insurance Policy Exclusions

While insurance policies vary widely and come with their own set of exclusions, there are some common exclusions that are not covered by any insurer.

Suicide- An exclusion that is a mainstay of most insurance policies, attempting suicide is a sure-shot way to ensure neither you nor your dependents receive any compensation from your insurer. Most policies refund the amount paid as premium, but there is no death benefit that is paid out. Suicide exclusions also specify a time period, with no claims being paid out if the life insured commit suicide within a year of the policy being taken out.

This exclusion applies in case of both clinically sane as well as insane individuals and is ironclad. Since insurance companies investigate a claim before paying it out, there is no way to dodge out of this one.

Self-harm or injury to insured product- A way to negate insurance fraud, companies will not pay out a claim in case of deliberate harm done to the insured party. This is more prevalent in case of vehicular insurance, where the insured vehicle is sometimes deliberately damaged.

A claim is then filed and the vehicle is upgraded or the money used for other purposes. Insurance companies are combatting such claims by conducting thorough investigations. If the company finds a claim to be fraudulent, it could spell trouble as your existing insurance policy would be deemed null and void and you could be blacklisted by the company, making it difficult for you to procure insurance from another company.

Claims made if the insured individual was indulging in illegal activities such as rioting, criminal activities are also not entertained. Most companies have a detailed list of the various exclusions that are applicable under this broad umbrella, and include injuries or death due to the insured being under the influence of alcohol or drugs, among others.

In the case of life insurance, complications arising out of childbirth or any risk to the mother or foetus are not covered since these are covered under a health insurance plan.

Pre-existing medical conditions- Death or any claim made due to a pre-existing medical condition is generally excluded from most insurance policies unless otherwise specified. Applicable when it comes to life insurance policies, the insurance company will not pay out a claim or cover costs in case of the life insured’s death due to a lifestyle disease or a condition that the insured had prior to taking on the policy.

Most health and life insurance policies specify this exclusion, preventing insured individuals or their dependents from filing any claim relating to complications arising out of cancer or such a diagnosis.

The above exclusions are general and can be applicable to life insurance, car and two-wheeler insurance as well as health insurance. There are also some specific insurance exclusions which are touched upon briefly below:

Motor insurance:

With regard to motor or car insurance, most policies do not cover loss due to an accident caused by a driver other than the owner of the vehicle or an underage driver or rider.

Any damages that occur when the vehicle is not covered under an insurance policy are also excluded, as are damages that occur when the vehicle is used for illegal purposes.

Health insurance:

General exclusions for health insurance plans include claims made as a result of abuse of intoxicants and narcotic substances.

Any expenses that could arise out of complications as a result of the insured contracting HIV/AIDS. All allied expenses are also exempt from cover in such cases.

Treatment for congenital diseases are also usually excluded, unless specified in the insurance policy.

While exclusions are part and parcel of an insurance policy contract, they merely define the boundaries of the coverage offered. Insurance policies provide a wide scope of coverage, though it is always wise to read the policy document carefully before signing on the dotted line.

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