Hidden Clauses in Policy Wordings That You Didn’t Know About
Although insurance companies of course want us to feel as if all clauses are as clear as an un-cloudy sky, we know that somewhere in the stratosphere above us always hides a little tiny rain cloud. True to their name, Insurance Policy Wordings are extremely wordy. Understanding and remembering every little clause is difficult. I’m sure that most of us can think of a million more fun things to spend our brain energy on! That’s why we’ve tallied up some important hidden clauses for you.
For each of the major insurance plan types, you’ll find below the most common hidden clauses! This is not to say that every insurance policy contains these clauses with absolute certainty, but most definitely do.
Life insurance is the insurance which we obtain in order to protect our loved ones should we pass on unexpectedly or be the victim of total and permanent disability. The few most hidden (and possibly most important) clauses for life insurance policies are the following:
- Most life insurance plans have a minimum coverage term of 5 years or more. Ending the plan before the planned end date results in a relatively large fine, and no payout. Make sure you know how long the plan’s term is before signing!
- Once you have signed onto a life insurance policy, the premium is usually fixed regardless of your age and health. However, many insurers require that you go to a health check-up before being able to renew your policy at the end of the term, potentially resulting in a rise in premium.
- The Suicide Clause: If the cause of death is suicide, the policy wording usually dictates that the policy is void. The policy may say that it is only void if the said event takes place within a certain time interval after the plan’s commencement date.
Health insurance exists in order to make sure that you have adequate coverage for your personal health. Seems frank enough! The scope of coverage provided by health insurance is quite large. Meaning that there is plenty of room for hidden clauses, both good and bad. Here are a couple of the most important ones:
- Deductibles: This is the fraction of the total claimable amount that you have to pay before the insurer makes any payout. Deductibles vary for different conditions, illnesses, and medical procedures. Usually, the deductibles are listed in the Policy Wording, meaning that you have to search for them. For example, the deductibles for inpatient hospital coverage are not listed in the same place as the actual coverage amount is listed. Make sure to locate the section listing deductibles, and compare to the actual amount offered as coverage.
- Co-Insurance: After you have paid the deductible amount, this is the remaining amount of the total claimable coverage that you must pay. While deductibles are a fixed value, co-insurance is given as a percentage, meaning that the amount paid will vary. Similar to deductibles, these are often listed in a separate section.
Critical Illness Insurance
Critical illness insurance covers your “life costs” should you become severely ill. If you fall victim to a critical illness, you may not be able to cover your regular bills, such as rent and transportation costs. There are several important hidden clauses in policy wordings:
- All critical illness plans have defined waiting periods. There is a waiting period from the start date of the plan to the date when claims can be submitted. There is a waiting period in-between claims. Lastly, there is a waiting period between claims and payout - wherein the insured has to remain alive. The length of the waiting periods vary, and the shorter the better!
- One quite common condition worldwide is kidney failure. In critical illness insurance plans, kidney failure is often defined as the failure of both kidneys; therefore, you will not receive a payout if only one of your kidneys fails - which is of course also a very difficult affliction.
- Most critical illness plans only cover cancer in its critical stage, known as late-stage cancer. Only the plans with specified coverage for Early Critical Illness will provide coverage for early and intermediate stages of cancer. Although these stages are not as severe, they may result in inability to work and perform regular life tasks.
Personal Accident Insurance
Accidents can happen to anyone. Knowing the ins and outs of your personal accident insurance policy can be the difference between disaster and naught. Below are some major hidden clauses:
- The coverage for personal accidents is reduced or not applicable at all if the event leading to the accident is defined as a risky activity. The definition of risky activity is specific to each insurer and can be found in the Policy Wording. It is important to know if you are covered before taking part in a potentially risky activity. Do check which activities are listed!
- Personal accident insurance also covers for costs relating to home modification. This means that if you have to modify your home in order to, for example, get wheelchair access, this may be covered by your personal accident insurance! The most basic plans may not have this, however, so make sure to check that it is listed in your plan as a benefit.
Travel Insurance seems to be quite straight-forward, but there are a few pitfalls and discrepancies amongst plans. No one wants to be abroad and find out that your travel insurance coverage isn’t what you thought it was! Here are a few hidden clauses:
- Most Travel Insurance policies do not cover baggage or belongings which you do not physically bring with you on the trip. For example, if you were to forward your bags ahead of time, any loss or damage would not be covered.
- If war or similar situations lead to the loss of baggage, this is usually not covered. Similarly, it is only when the insured person can prove that he or she is a completely innocent bystander that other inconveniences resulting from war are covered.
- Adventurous activities, such as scuba diving or parachuting, are not necessarily covered by travel insurance. If you plan on carrying out these types of activities, make sure they are included! If you don’t have such plans, there’s no need to buy a policy with included adventurous activities as it will most likely be pricier.
Your little fluff-monster cannot read the Policy Wording for their insurance policy. It’s up to you to help them out! Below are a couple of the most hidden clauses in pet insurance policies:
- Pet Insurance policies provide coverage for Third Party Liability, meaning that if your pet is the cause of bodily harm to another individual or harm to personal belongings of another individual, you will be able to make a claim to compensate for any payout you are entitled to make to the other individual. However, a slightly hidden part of this clause is that your own family members sometimes do not fall under the definition of Third Party.
- Under Pet Insurance, you will be able to claim for a payout if your pet falls victim to Accidental Death. An often forgotten term for this clause pertains to the payout made if your pet is killed in a traffic accident. In this case, a Police Report has to be filed within a certain time-period after the car accident in order for the amount to be claimable.