How understanding insurance exclusions can protect you from unexpected claim denials

Consumers must be aware that one of the common exclusions found in insurance contracts relates to claims arising from criminal and illegal activities such as resisting lawful arrest and driving under the influence of alcohol.

Denise Gabriels, Lead Ombud of the Life Insurance division of the National Financial Ombud Scheme (NFO), stressed that understanding insurance exclusions is very important when it comes to pay-out. Insurance exclusions are provisions that specify circumstances under which claims will not be paid, even though your policy is active and premiums are fully paid.

Insurers generally will not indemnify losses that arise from unlawful conduct, reflecting the principle that insurance is designed to protect against unforeseen risks, not deliberate or illegal acts, she explained.

In a matter recently reviewed by the NFO, an insurer declined a claim following the death of the insured, citing criminal conduct. The policy expressly stated that no claim would be paid if the insured event was caused by criminal conduct, including circumstances where the insured was under investigation, being prosecuted, or had been convicted of a criminal offence.

Evidence revealed that police officers were attempting to arrest the deceased when he allegedly seized an officer’s firearm and attempted to discharge it. He was subsequently fatally shot by other officers at the scene. With no evidence contradicting the police account, the insurer concluded that the death arose directly from criminal conduct and, therefore, fell within the exclusion.

“Our office agreed that the insurer was not contractually obliged to pay the claim, and the decision to decline it was justified,” Gabriels said. She added that this case demonstrates how exclusions can decisively determine the outcome of a claim.

“Insurance exclusions are not hidden traps. They are fundamental to how insurance works. For policyholders, understanding exclusions is just as important as knowing what is covered". She advised that by reading carefully and asking questions, policyholders can ensure that they are adequately protected and avoid unpleasant surprises when it matters most.

Common categories of exclusions include claims arising from illegal activity and hazardous pursuits such as skydiving, scuba diving, or mountaineering, which may be excluded due to their elevated risk profile.

Health conditions diagnosed before the policy’s inception, such as heart disease, diabetes, or asthma, are often excluded. Losses caused by war, terrorism, or civil unrest are generally excluded due to their catastrophic and unpredictable nature, while claims resulting from deliberate harm such as self-death or self-inflicted injury, usually within the first 12 to 24 months after the policy starts, are excluded.

The policyholder or beneficiary must first show that a valid policy exists and that the insured event occurred (such as death, disability, or diagnosis of a covered critical illness). Once this is established, the burden shifts to the insurer.

If the insurer wants to reject the claim based on an exclusion, it must prove that the exclusion clearly applies, Gabriels explained. This often requires evidence such as medical records, toxicology or pathology reports, accident reports, or police findings. If the insurer cannot prove that the exclusion applies on the balance of probabilities, the claim should be paid, she said.

Gabriels further explained that exclusions don’t mean your insurance won’t work. “Knowing what is excluded, where to find exclusions in your policy, and who must prove they apply puts the insured in a much stronger position.”

She advised that when taking out cover, ask questions about exclusions you don’t understand and keep copies of all disclosures you made during the application. “If anything is unclear, contact the insurer or adviser for clarification. If the policy does not accurately reflect the information provided during application, request that it be corrected,” Gabriels said.

zelda.venter@inl.co.za