Being excluded is something no one really wants. Kids in the playground at school don’t want to be excluded, and teenagers certainly don’t want to be excluded from the best party that their friend is having.
As we reach adulthood though, there is a time and place for exclusions. One of those is in the life insurance space.
Whilst we know that most of our clients are annoyed when the life insurance company says they are placing an exclusion on their policy (and we do understand that it’s annoying), it’s not always a bad thing though. And here’s why.
Since people seem to understand car insurance better than life insurance, I will give a car example. Assume you’re a safe driver. You’ve never had an accident, and never made a claim. Then along comes your friend who already has a damaged car and they apply for insurance through the same company. They don’t tell the insurer their car is damaged, they simply pay their premium, wait a few months, then make a claim to fix their car. The result of this? Your premium goes up! Hardly fair, is it?
When life insurance companies place exclusions on certain policies, they are protecting not only themselves, but also protecting every other person who holds a policy with that company. Yes, the insurer is trying to protect themselves from having to pay out, however in doing this, they are really protecting their other customers.
We often hear from clients:
“I know I have a back issue, that’s why I WANT insurance, to cover my back!”
We may feel it’s unfair that the insurer is excluding your back, but imagine if they were covering everyone’s pre-existing injuries and illnesses. The premiums simply would not be affordable.
It’s much better to know and understand what is being covered by your premium. Insurance companies that are clear about exclusions on policies are actually more likely to pay out on other claims, as they have assessed you up front and been transparent about what is covered.
The last thing you need is to pay years worth of premiums only to make a claim and be told that you had a pre-existing condition and the insurance company isn’t going to pay.
It’s also why you should take out insurance while you’re young, fit and healthy before illness and injury catches you!