When Words Aren’t What They Are
Insurance words are more like terms of art. A special kind of art. Like the fraudulent kind, sold to you by a dealer who told you it was something it wasn’t and then charged you full price. Here are some favorite examples:
There are lots of ways that car insurance policyholders may be confused by the coverage they’ve purchased. For example, you may think that “comprehensive auto insurance” covers a lot. It doesn’t. It does not cover injuries to people you hit or people hurt in your car, and it does not cover damage to your car or to the cars and property of others. It only covers things like theft, vandalism and storm damage. This may be important if your car is new, but make no mistake – it is hardly “comprehensive.”
“All risks” mean some risks; “all perils” means some perils.
“All risk” and “all perils” policies are not what they seem. If you purchase property insurance with "all risks” coverage, you’re covered for all losses – except the ones that are excluded. Huh? As to “all perils” coverage, you’re covered for losses – as long as the cause is listed. So, not all.
The common understanding of a hurricane is a windstorm generating copious amounts of water. Homeowner policyholders who want to make sure they’re covered if a hurricane hits often sign “hurricane endorsements” with clearly labeled “hurricane deductibles,” thinking they have full coverage beyond the deductible in the event of a hurricane. They would be wrong. Elsewhere in those very same policies, insurers will expressly exclude payment for flood damage – even if connected to a hurricane! To get flood insurance, homeowners must purchase separate policies from the federal flood insurance program. Except if you’re living in an actual flood plain, your insurance agent probably won’t explain any of this to you.
If there’s one thing insurance companies know how to do, it’s hold onto your money. Take the COVID pandemic and businesses interruption (BI) insurance. BI is meant to cover business losses if business operations are, well, interrupted. Many businesses dutifully paid premiums for this coverage for years, fully expecting that a lockdown would be just the kind of situation that might warrant a BI claim. But insurers won’t pay these claims, saying either that the fine print in policies exempts virus-related business losses entirely, or even if it doesn’t, still limits what they owe because these businesses have no physical damage from a virus. The fight continues.