Insurance policies are not only difficult to read – sometimes they are completely incomprehensible. Just ask Lori Lugo, an elementary school teacher from Corpus Christi, Texas.
She tried to get roof insurance that covered her house and car only to run into the fine print. You know, declaration pages with long lists of risks and dangers. And of course sentences that continue for paragraphs.
Lugo called her insurance agent and asked him what it all meant. It was a long call.
“I want to know what I’m paying for,” she says.
“Insurance contracts are a near-insoluble puzzle to the average person,” said Jason Turchin, Miami personal injury attorney. In his opinion, insurance companies market insurance as something that does more than it actually does.
“When you look at the actual conditions, there are few specific items that actually qualify for coverage.”
Why are insurance policies illegible? What is it that makes you so difficult to understand? Answering these questions leads to further questions: Do policyholders benefit from these Byzantine treaties? And do scratch-resistant insurance policies pile the odds against you when you need to make a claim?
For this reason, insurance contracts are illegible
“The guidelines are written in a unique language that takes years to understand and speak fluently,” said Gina Clausen Lozier, partner at Berger Singerman, Florida law firm, which specializes in insurance claims. “Lawyers who know how to analyze insurance policies understand the nuances of how policies are constructed and designed.”
“The insurance contract must specify exactly what is and what is not,” said John Espenschied, principal at Insurance Brokers Group, a Missouri-based insurance agency. “People assume something is covered, but you need to read the cover or ask questions, especially if you are buying a very affordable policy compared to other providers.”
An insurance policy is a legal document that must exist in court. Therefore, according to experts, you will see many legal and special terms in an insurance contract.
“Plain language opens things up to confusion,” says PJ Miller, partner at Wallace & Turner Insurance, an independent insurance agency. And ambiguous contracts could be torn apart by lawyers, he adds. In court, ambiguous political language can work in favor of the consumer.
Miller says years ago insurance contracts were easier to understand. However, over time, new laws, regulations, legal proceedings and different opinions have made the contracts more complex.
In other words, insurance contracts are complicated because in the event of a lawsuit or major claim they have to cover all of their bases. Increased regulation has led insurance companies to make contracts more dense, making them difficult for the average policyholder to read.
Blame the lawyers
Do guidelines still have to be so tight? According to Zhaneta Gechev, founder of One Stop Life Insurance, it all adds up.
“Insurance companies have a team of lawyers who work out the terms and conditions for each policy,” she explains. “They realize the importance of having the right language to protect the company in the event of a lawsuit. In addition, the insurance industry is heavily regulated. It is important for carriers that all conditions and exclusions are established so that they comply and protect themselves again in the event of a dispute. “
She adds, “Ultimately, it is a legal contract between you and the insurance company. That makes things dry and difficult to read. “
“Insurance policies are typically 150 to 200 pages long and can be difficult for ordinary consumers to navigate,” said Petro Zinkovetsky, a New York insurance attorney who specializes in insurance. “They often contain exceptions and exclusions, and sometimes there are exceptions to exceptions. Most small businesses are unable to hire an attorney to pre-screen insurance policies, especially since many of these policies are non-negotiable. “
Mandates for readability
So this can be a shock: the contracts should be easy to read.
“Believe it or not, travel insurance policies typically have readability standards that were set in the 1980s,” said John Cook, president of QuoteWright, a travel insurance website. He says insurance companies should adhere to legibility standards that were passed three decades ago.
“Insurance policies have an 8th or 9th grade target readability,” he adds. “However, an assessment in 8th or 9th grade does not mean the policy is legible or easy to understand.”
The Centers for Medicare & Medicaid Services provide a wealth of resources on the readability of health insurance plans administered through government programs such as Medicare.
And some states require a specific readability level for auto insurance policies, and insurers must submit their readability values to the state’s Department of Insurance when creating new policies. In Colorado, for example, auto insurers cannot issue or renew policies that exceed 10th grade reading or score less than 50 on the Flesch Reading Easy scale.
In Arizona, auto insurance forms must have a Flesch Readability Score of 40 or more. But there is leeway. If a particular form does not meet the minimum score, it can be grouped with the rest of the policy to get the score.
How do insurance companies behave? We looked at the filing with the Colorado Insurance Department, which included readability ratings. Here are some examples:
- A Geico insurance policy called “non-owner” was one of the easiest policies to understand at 65.3. Geico’s recreational vehicle insurance policies are harder to read, valued at 50.1.
- Among the guidelines filed by Liberty Mutual in Colorado, the easiest to read is “Notify Others If a Cancellation Is Made” with a score of 65.5. His “snowmobile recommendation” is one of the toughest with 50.1.
Who benefits from complicated insurance contracts?
Tina Willis, a former insurance protection attorney, says the clear beneficiaries are insurance companies.
“Courts evaluate the language of the contract to determine whether something is a covered loss or is excluded from coverage,” she says. “Since most consumers never understand exactly what is covered when purchasing the policy, insurance companies make money from the consumer’s lack of awareness of the technical legal arguments that are often used to deny coverage.”
For example, during the COVID-19 outbreak, many companies made claims about their business interruption policies. Insurance companies tried to deny many of the claims noticing the fine print. Many of these claims have landed in court.
“Of course, many of these business owners had dutifully paid their premiums and awaited this protection for years without realizing the protection they believed would be denied them if they really needed it. So the insurance companies have benefited from the years of premium collection, ”she says.
Some experts say that insurance language is part of the insurance industry’s business model in order to confuse and benefit from the confusion for the average policyholder.
“Insurance companies write insurance policies to be tight and illegible so they can withhold coverage as often as possible,” said Dustin Birch, a Nevada attorney who specializes in malicious intent. “The guidelines are filled with jargon, legal, and technical terms that make it easier to refuse coverage for a claim. I have seen this over and over again in malice cases. “
But there could be a silver lining for consumers, says Michael Alavi, agency director at Apartment and Building Owners Insurance Agency, an insurance agency in California.
“It’s a legal contract that was written to stand trial,” he says. “An insurance company that is able to clearly define what it wants to cover and avoid or resolve litigation in a more cost-effective way would theoretically be more efficient and ultimately offer lower premiums.”
Tips on Reading an Insurance Policy
Many customers do not review their contracts before purchasing insurance. According to the pros, this is a mistake. Here are some tips for verifying a tight contract:
Get help. Agents and lawyers are trained to decipher the tightest insurance contract. “A good agent can easily point out the key drivers and terms of a policy to customers when delivering it,” said Suzy Zinn, an independent life insurance agent in California. “You can even send a sample beforehand so the customer has time to review it and see if they have any questions.”
Pay attention to the capital letters! Sometimes the “pitfalls” of insurance are hidden within sight.
“Pay close attention to capitalized words,” said Jeremy Murchland, president of Seven Corners, a travel insurance company. “They are defined in the policy with a specific meaning and coverage may depend on the definition.”
For example, the definition of a doctor says – in capital letters – that he cannot be a member of the family. In other words, you may not be able to get your aunt, who is a health care professional, to diagnose a medical problem that is meant to be covered by travel insurance.
Get a second opinion. If your insurance agent doesn’t seem helpful, you can escalate your insurance issues.
“If you are having trouble determining the extent of your policy’s coverage, you should always seek advice from an expert,” said Adria Gross, founder of MedWise Insurance Advocacy, a state-licensed insurance broker and consultant in New York. In addition to the services of a medical attorney such as Gross, you can also turn to an attorney who knows about insurance.
Before paying for any insurance policy, take the time to read and understand it. If necessary, get help so you know what coverage you are paying for – and which are not.