Why do insurance policies seem difficult to understand?

On Behalf of | Nov 11, 2020 | Insurance Bad Faith

Following a calamity like a storm that causes damage to your home, you expect your insurance company to honor your policy and cover your damages. But then you receive a notice that your insurer has rejected your claim. It turns out that you had misunderstood the terms of the policy, or so the insurer claims.

The complexity of many insurance policies can baffle property owners. It is easy to think a policy provides blanket coverage when it turns out the policy only covers specific pieces of property and for only particular kinds of damage. If your insurance policy seems confusing, there are common reasons why it may be the case.

Complying with the law

Insurance policies used to be simpler in nature. As Forbes explains, as lawmakers passed new laws and regulations over time, insurers had to revise their contracts so they complied with the new laws. Also, if a court handed down a landmark case in insurance law, insurers had to account for those as well. As a result, insurance policies swelled in size and content.

Inserting legal language

Because insurance companies had to address various laws and court rulings, they tend to load their policies with legal language that can stand up in court. Since insurers fear lawsuits on account of not complying with the law, they will incorporate specific terms and explanations in their policies that address these laws. However, policy owners may not have a firm understanding of these legal matters and could become confused by the policy language.

Understanding an insurance contract

Even though insurance companies make many contracts dense and complex, you as a policy owner should still understand what you are reading. Some laws and regulations across the country mandate certain readability levels for insurance contracts. Chances are your insurer may be in violation of a legal or ethical standard if your insurer is making your contract hard to understand on purpose.

You may avoid a possible bad faith case by making sure you understand a policy before you sign it. Still, in the event an insurer does use confusing jargon to deny you coverage, you might end up with a case that your insurance company acted in bad faith by turning down your claim.