Exclusions And Their Effect On Loan Protection Insurance

How exclusions can ruin your eligibility for a claim

One of the most misunderstood items in any insurance policy is the insurance exclusions that are contained within the insurance policy. This is especially true when it comes to loan protection insurance policies, such as the ones used to cover the loans used to obtain a car or a home. Exclusions are present in nearly all insurance policies, a fact that many holders of insurance policies are blissfully unaware of.

Insurance exclusions are added to the insurance policies by insurance companies in order to minimize their risk of being taken advantage of by scam artists and dishonest policy holders. These exclusions will generally cover acts that could be considered deliberate or are caused by negligence on the part of the policy holder. For example, many life insurance policies contain a clause that invalidates the policy and releases the insurance company from any obligations if the person covered by the policy dies as a result of suicide or negligence in their actions that result in their death, such as an illegal drug overdose.

Many insurance policy holders are unaware of the insurance exclusions that are included in their insurance policies and are under the impression that everything that they think needs to be covered is covered under their policy. It is only when the unthinkable happens, such as an accident or a natural disaster, that the policy holder finds that their insurance policy does not cover everything that they thought it did. This could lead to the financial ruin of the policy holder depending on the cost of taking care of the issue that arose and that the insurance company will not pay for.

Here is one of the best examples of how an insurance exclusion to an insurance policy, especially a loan protection insurance policy, can greatly impact the policy holders in a negative way. When Hurricane Katrina hit the coast of Mississippi and Louisiana, individuals in those states were reassured by the fact that their home owner’s insurance policies contained hurricane insurance and would pay for the cost of rebuilding the homes that they lost. But when it came time to make the claims that should have resulted in payments to repair their homes, they got a nasty surprise.

The home owner’s insurance policies that many of the home owner’s had purchased did contain hurricane damage protection, but the insurance companies decided that a majority of the damage to the homes were caused by the storm surge, or flood, that occurred during the storm. Floods were excluded from the insurance policies and, although the flood occurred during the hurricane, the insurance companies refused to pay the claims that resulted from flood damage. Today, many homes in the areas hardest hit by Hurricane Katrina still remain vacant because the home owners do not have enough money to repair their homes without help from the insurance companies. Incidences like this are the reason why it is so important for policy holders to know what insurance exclusions are present in their insurance policies, especially when it comes to loan protection insurance.

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