Principles in the application of exclusion terms
Concerning any type of insurance contract, whether personal, property, or civil liability, the insurer will provide insurance exclusions. This is also one of the compulsory contents in an insurance contract, according to the Law on Insurance Business.
How should we define exclusion terms on the Insurance Policy?
Exclusion term refers to the cases in which even though the insured event occurs, the insurer isn’t liable to pay the insurance money or indemnify. Due to its distinctive nature, the Law on Insurance Business requires the insurer to clearly interpret this clause to the policyholder when entering an insurance contract.
For the avoidance of doubt, the insurer may also refuse to pay the beneficiary or to indemnify the insured not based on the exclusion term, but on the basis that the request is not included in the insurance coverage.
Common exclusion terms
Depending on a particular type of insurance product, insurers develop exclusion terms following its nature and the level of risks of the insured subject.
For instance, for mandatory insurance for motor vehicle owner’s civil liability under Circular 22/2016/TT-BTC, the insurer will not compensate for the damages in the following cases:
- ¬ The owner, driver, or damage-suffered intentionally cause the damages.
- ¬ The driver causing an accident intentionally flees without performing the civil responsibility of the motor vehicle owner, driver.
- ¬ The damage also causes indirect consequences such as a decrease in commercial value, damage associated with the use and exploitation of damaged property.
Meanwhile, with the compulsory fire and explosion insurance specified in Decree 23/2018 / ND-CP, the exclusion points will be related to the insured (property), specifically:
- ¬ The property was burned or exploded under the decision of competent state authority.
- ¬ The property self-fermented or self-heated; the property is subjected to a heat-related treatment.
- ¬ Electrical machinery, equipment, or parts of electrical equipment are damaged by being directly affected by overloading, overpressure, short circuit, self-heating, electric arc, electric leakage due to any other causes, including lightning.
Note on the exemption of exclusion term
Insurers shall not apply the exclusion term in the following cases:
- ¬ The policyholder unintentionally violates the laws;
- ¬ The policyholder has a proper reason for being delayed in notifying the insurers about the insured event.
Before entering an insurance contract, the policyholder shall carefully research the exclusion terms and request the insurer to interpret it to avoid such cases.