Terms and conditions that an insurance contract does not cover

Your insurance policy is expected to deliver when things go wrong. The insurance company promises to pay the sum assured when an insured event occurs, provided the policyholder has paid the premium in advance. But to bring down the possibility of anti-selection and also limit losses, insurers introduce the concept of exclusions to the cover offered. Exclusions simply connote conditions that an insurance contract does not cover.

An example will make it easier to understand. An individual, with the intention to defraud an insurance company, may buy a life insurance and then commit suicide. A life insurance policy promises to pay the sum assured to the nominee upon the death of the life assured.

But a suicide in the first year of the policy is not covered at all. This ensures that the insurer does not incur undue losses as individuals are highly unlikely to plan a fraud by committing suicide. The same applies for group life insurance policies other than the policies issued in lieu of employees' deposit-linked insurance where the sum assured is limited.

Similar exclusions are applicable for accident disability rider. If a life assured dies in an accident while driving in a drunken state or participating in a car racing event or due to drug abuse, then his survivors won't be paid the benefit payable under the accident cover rider.

Then there are other exclusions such as deaths occurring in war, terrorism, droughts or accidents incited by the actions of the life assured. In case of surgical assistance, surgeries carried out for cosmetic purposes are also excluded.

An insurer may choose to exclude certain benefits for a specific period of time. This is termed as the waiting period and is seen mainly in non-life insurance policies. For example, a critical illness cover will insist on a waiting period of 180 days from the date of issuance of the policy.

The waiting period protects the life insurance company from a fraudulent claim. Some insurance companies cover pre-existing diseases after a waiting period of four years, whereas a set of daycare surgeries is also covered after a waiting period of two years.

While buying a policy, a buyer should read the exclusions in detail. If you need further clarification, you may check the policy wordings and contact the insurance company. If you are moving from one insurer to another for health insurance, please double-check the exclusions in the new policy. Under benefits due to portability, you are entitled to some exclusion waivers.