3 Big Things That Limit What Insurance Companies Pay Out

9 June 2015 by Elijah Steward

Insurance policy documents can seem like a briar patch of confusing language and fine print. If you are trying to figure out some of the biggest limitations on your insurance contract, whether it's home, auto, major medical or some other type of policy, these items often come into play.

The Deductible

The deductible is one of the most common, and least understood, elements of an insurance policy. However, it plays a crucial role in helping customers and companies negotiate, and in setting premium rates.

One of the easiest ways to think of the deductible is that it is "deducted" from the portion of a claim that the insurance company pays out. For instance, if you have a $1,000 deductible, and you put in a $2,000 claim, that first thousand dollars is your responsibility because you chose a policy with that level of deductible.

Customers may not always have a choice, but it's always important to understand what the deductible is and how it will be applied to claims. The deductible is one of the biggest factors in how much of your insurance claims you get paid out by your insurer.

Annual or Lifetime Maximums

Maximum payout amounts are often found in major medical policies, but they may apply to other types of policies as well. A maximum or cap is just what it sounds like: for big dollar claims, insurance companies would only pay up to the max and the remainder will be the customer's responsibility. For example, some major medical policies have annual maximums as low as $10,000 per person. So if you submit a $15,000 claim, that extra $5,000 isn't covered. You can see how a maximum benefit can have a major influence on the policy, one that's not often evident until there's an insurance claim in play.

Exclusions

Many other types of policies clauses that leave a lot of money on the policyholder's plate credit are called exclusions. Certain types of services or claims can be excluded from an insurance contract. This often happens in homeowners insurance, where contract may not cover flood, earthquake, fire, or other kinds of perils that actually present real threats to the homeowner.

As an aside,  another kind of exclusion, the "pre-existing condition," was common in medical insurance right up until the Affordable Care Act started to outlaw the practice of denying claims for pre-existing conditions. This is at the root of how insurance companies limit their payouts and what you really have to look for on insurance contracts.

Look for these items that can leave you with big dollar bills, even if you already have insurance coverage. For more information, contact an insurance agency like Farmers Insurance Group.

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