This article aims to provide an overview of exclusion clause in a life insurance policy. Thereby, an insurance buyer – the contracting party that is considered to be a weaker one in the insurance relationship, can make the most appropriate decisions when entering into an insurance policy. At the same time, the contracting parties would avoid disputes related to compensation liability or refusal to pay insurance proceeds when an event of COVID-19 occurs.
I. Introduction on insurance liability exclusion clause
When entering into a life insurance policy, an insurance buyer is spending money to buy a stable financial foundation for life and to prevent possible risks related to life and health, which can lead to reduction in the working capacity of the insuree.
Therefore, the buyer, above all, wishes to receive maximum benefits when an insurance policy expires or an insured event occurs. So, what is the insurance liability exclusion clause and what does it mean in the insurance policy?
1. Definition of the exclusion clause
If the law sets forth definition of “insurance coverage” (“coverage”) as limited range of risks, excluding losses and arising costs under an insurance agreement an insurer will be responsible for if it occurs, “exclusion clause” is intended to narrow the coverage. The more coverage exclusions, the narrower the coverage will be.
In other words, this will reduce insurer’s indemnification liability, specifically when an insured event occurs but falls into liability exclusion, the insurer will not be obliged to pay insurance proceeds toa beneficiary.
2. Cases of exclusion of insurance under the Law on insurance
The exclusion clause usually excludes major catastrophic risks, risks that are only covered under special conditions, and events that violate laws or commitments, an insurance enterprise is not required to pay insured amount. For example, damage or insurance events caused by intentional errors of insured or insured beneficiaries or insured damage caused by earthquakes, tsunamis, volcanoes, wars, strikes, riots.
3. How exclusion clause is drafted
According to current regulations, an exclusion clause is a provision that must be clearly specified in an insurance policy where an insurance enterprise is not required to compensate for damages or pay insurance despite insured events.
The exclusion clause of an insurance product in the Products Code or insurance policy is usually expressed in the following forms:
- Separate clause, including:
General exclusion provision: generally applicable to all insurance conditions specified in the Products Code or the insurance policy;
Exclusion provision for each separate insurance condition.
- Merged clause is shown in insurance conditions specified in the Products Code or insurance policy.
II. Impact of COVID-19 on insurance exclusion clause
Since the end of 2019, the acute respiratory infection by 2019-nCoV has caused major damages in Vietnam in particular, and the world in general in most economic and social sectors. Regarding contents of life insurance, customers participating in the signing of insurance policies are questioning that: can they be solved and paid for insurance if they are diagnosed with an acute respiratory infection caused by 2019-nCoV?
Currently, many of insurance enterprises have added rules, terms of main insurance products, and add-on products corresponding to the insurance policy that a buyer has participated in related to 2019-nCoV. Therefore, events occurring related to this pandemic can still be classified as insurance events. As a result, if the buyer has signed the insurance contract without any specific provisions on insurance benefit payment due to 2019-nCoV (including hospital fees and deaths) before the outbreak in Vietnam, insurance beneficiaries still enjoy insurance benefits when ensuring full and proper completion of the buyer’s obligations.
However, insurance buyers should note that, depending on policies and regulations of insurance enterprises, payment of insurance amount will vary accordingly.
Vo Ngoc Trang Doan