One of the great myths about insurance is the amount of fine print you can find on the policy. Or at least that’s what happened a while ago. Currently, the contents and limitations of the insurance policy have been simplified and the size has been equalized.
That doesn’t mean that the myth is gone, the font is bigger and usually in bold, but still, it may still surprise you. And almost always the surprise is negative.
I have been involved in insurance for more than three decades and still today I hear how the insurer clings to the fine print to avoid paying.
So I think the time has come to dedicate an article to the limitations of the insurance policy that cause so much abuse.
Let’s go with it!
How are the clauses of the insurance contract different?
As in any other contract, in the insurance contract, there are also stipulations and clauses that bind those who sign it. In the article on how to interpret an insurance policy, I tell you about the parts that make up the contract. In this one, we are going to see what is the difference between the delimiting clauses and the limiting or excluding clauses.
The general and particular conditions will be drawn up clearly and precisely. Clauses limiting the rights of the insured will be highlighted in a special way, and they must be specifically accepted in writing.
The Insurance Contract Law has been in force for about 40 years and although it has undergone several updates, the last one took effect on January 1, 2016, a few Supreme Court rulings have been needed to precisely define the difference between the risk delimiting clauses and limiting clauses in the insurance contract.
For the TS, the risk delimiting clauses are those whose purpose is to define the object of the insurance, specifying which risks, if they occur, will entitle the insured to receive the agreed benefit.
However, by limiting clauses, he understands that they refer to conditioning or modifying the rights of the insured and therefore the compensation, once the event that is the subject of the insured risk has occurred.
The insurer will compensate for the market value of the car if you collide with a lamppost and you are not drunk.
This is a typical example of self- damage coverage in car insurance. If you collide with a tree (insured risk) the company will pay you the market value (coverage limitation), as long as you do not drive the car drunk (limiting condition).
What delimiting clauses can I find in my insurance policy?
Of course on paper, if it seems so.
But things get complicated when they put a booklet with more than 40 pages on the table. Packed with articles, bold text, and different font sizes or taking you from one article to another.
As I was saying, risk delimiting stipulations are those that define the object of the contract. That is, they define and specify:
- What are the risks that constitute the object of the insurance.
- What amount is insured and what are the limits of the benefit.
- During what period it is constituted,
- In what time frame.
Its purpose is to establish, without ambiguity, the objective bases of the nature of the risk in coherence with the object of the insurance. If we take this to your insurance, you will find these delimiting clauses:
The clauses that define the risk.
This group includes the conditions that describe the risk and the coverage provided by the insurance contract.
They are clauses whose wording must be clear and understandable, although they do not need to be highlighted in the policy. These are some:
- Those that identify the parties that establish the contract, insurer, and policyholder, insured, or beneficiaries.
- They determine the people, property, or activity that is the subject of the insurance. If what you are insuring is a house, a car, an activity, or if it is health insurance or life.
- Where the risk is located and what are its characteristics and identifiers. The place where the home, business, or community is located, what are its characteristics, what prevention and protection measures it is equipped with, or the license plate and accessories installed if it is a vehicle.
- Sums insured. It is the value that we assign to the insured assets in the event of a risk.
- What risks are covered, which must be consistent with the nature of the insured property? If the object of the insurance is an asset (the house, the car, or the mobile ) the risks covered will be repaired or replaced. When it comes to people, the defined risks will be aimed at providing a service, medical care, compensating the insured or his beneficiary. For example, if you die or become disabled.
- The period of coverage. These clauses determine when the insurance begins when it ends if it is possible to extend it and for how long.
- The price of the insurance. It is one of the most important insurance conditions, so you must detail what makes up the price, and the conditions, if any, for its update.
Delimiting clauses of the contract.
There are other conditions in the insurance contract that delimit certain rights and obligations of the parties, which by their nature must be significantly highlighted in the policy.
Fundamentally, they are clauses that establish the limits provided by the insurance coverage or the procedures that the insured and insurer must follow in certain circumstances.
The clauses referring to the coverage limits are made up of those that determine the amount of compensation assumed by the insurer in each guarantee or all of them, as well as the deductibles or deficiencies that the insured assumes in each of the benefits. Insurance.
Other conditions do not become limitations of the insurance policy but that must be highlighted because they regulate the conditions and deadlines to oppose the extension of the insurance or its unenforceability. Also how to act in the event of a claim or how will be the communications with the insurer.
The limitations of the insurance policy. A (not so) small letter that may surprise you.
The limitations of the insurance policy are established by the so-called limiting or exclusive clauses. These are those that restrict, condition or modify the rights of the insured to compensation or the provision of the service by the insurer, once the event that is the subject of the insurance has occurred.
A few lines earlier, it referred to the fact that these are clauses that must be highlighted especially in the contract and that must be expressly accepted in writing by the policyholder. This is intended for the insured to have exact knowledge of the conditions that regulate the insurance contract.
The Supreme Court considers it sufficient that the limitations of the insurance policy are drafted in such a way as to allow the insured to understand their meaning and scope to differentiate them from those that are not of that nature.
By saying this, you validate your writing in bold or so that they stand out from the rest. Regarding the express acceptance in writing, it considers that the policyholder must sign both the general and the specific conditions, as these are the ones that usually contain the limiting clauses.
The jurisprudence has highlighted the differences established in article 3 of the LCS between the limiting and harmful clauses. While the former, even without being favorable to the insured, are considered valid referring to the nature of the insurance contract, the latter is always invalid.
Having identified the difference between the delimiting clauses and the limiting clauses, now it is time to see how the limitations are grouped in the insurance policy.
The limitations on all insurance coverage.
Many times it is difficult to distinguish between the delimiting clauses from the exclusive ones, despite being highlighted by a different typeface or highlighted in a different color, like those in the previous image.
However, we can distinguish between two groups of exclusions: those that affect all the coverage of the contract and the individual ones of each guarantee.
The limitations of the insurance policy that affect all the guarantees revolve around:
- Damages that occur before contracting the insurance or are different from those defined in the contract.
- Those events are related to the attitude and activity of the insured. Those caused by intent or gross negligence, inexcusable negligence, or neglect in the maintenance of the goods are excluded.
- Those declared by the public power as catastrophic or national calamity are also excluded. Those due to phenomena of nature or whose coverage is paid by the Insurance Compensation Consortium.
- The expropriation or requisition of property, by the imperative of any government or those that occurred in war conflicts.
- And normally, the payment of fines or penalties of any kind.
These exclusions, common to practically all contracts, are joined by others specific to each type of insurance.
The particular limits of each guarantee.
One of the characteristics that must govern an insurance contract is that the conditions that define it must be related to its nature. This requires that each of the coverage you provide has its own limitations or exclusions.
If you compare the previous image with this one, you will see that both are related to theft coverage. But while the former corresponds to home insurance, the latter refers to car insurance. Both are part of the respective general conditions and may be modified or suppressed through the particular or special conditions of the contract.
Both the general and specific exclusions of each guarantee must be known and expressly accepted by the insured. This consent requires that both the general and particular conditions must be signed in writing. If the contract is signed online, the acceptance can be made digitally.
Harmful clauses, without effect for the consumer
The general conditions, which in no case may be detrimental to the insured,…
In this way begins article 3 of the Insurance Contract Law, whose content gives as much play as to write this post.
The aforementioned text, in addition to referring to the delimiting and limiting conditions of the rights and their acceptance by the insured, is picked up from the start mentioning a third group of clauses, the harmful ones.
But while the former may be valid, although they require the express acceptance of the insured, the damaging clauses are not, as long as they may leave the content of the contract empty or frustrate the economic purpose for which the subscriber is signed.
As you can see, the concept of the injurious clause is more restrictive compared to the limiting one, making them invalid or null.
But it is also that the law requires its withdrawal from the insurance contract in the event that any of the general conditions of the contract is declared void by the Supreme Court.
Anyway, I have come up a bit and the article has become a bit long, but the better you understand what the limitations of the insurance policy are, the better you can defend your rights before your insurer.
If you still have any doubts, this is the essential information about the three types of conditions that you can find in your insurance:
- The clauses whose purpose is to determine or delimit the object of the contract, define the risk, its amount, or the term and scope of coverage.
- The limiting conditions whose purpose is to condition or limit the rights of the insured and therefore their compensation provided that the insurance risk had occurred.
- Harmful or surprising clauses, which reduce the content of the insurance contract in such a way that it is impossible to access coverage for the claim.
For me, a fundamental aspect when it comes to qualifying insurance is in the limiting clauses it contains because as an insured, the less my rights limit the better.
Do you still have doubts about any clause of your insurance policies? Leave it in the comments section.