If you stop and consider everything that an insurance company takes on when they insure people, it can begin to make your head spin. In order to protect themselves against bankruptcy, an insurance company has to consider all the possibilities and plan wisely for them. As a result, clauses and limitations can seem endless and even ridiculous sometimes, but they are there for a reason. In order for insurance to work, it has to be advantageous to both parties. For it to be beneficial to the providers, they must have restrictions that protect them from exorbitant expenses.

What Are Clauses and Limitations?
Clauses and limitations are portions of an insurance policy contract that inform the insured persons regarding what their plans do not cover. Whenever anything moves into the legal realm, everything needs to be precisely delineated. Because an insurance company can’t afford to leave loose ends, most exclusions and limitations documents are rather lengthy and specific.

Insurance Without Exclusions
To understand this, let’s consider what it would be like if an insurance company had no exclusions or limitations. They would pay for every claim you filed. That part would be great. However, the insurance company would have to make that balance up somewhere, so in return, premiums would be higher. While this could still be extremely beneficial for those who spend a lot of money on things that aren’t currently covered by insurance, everyone else would be paying much more for their insurance coverage. Restrictions not only protect the insurance company, but they protect the insured as well.

Common Exclusions and Limitations
Below is a list of several common exclusions. Check with your insurance company to find out which exclusions they have. While some are fairly common, others are company specific.

Pre-existing conditions clauses – Your health insurance company won’t cover any health problems you had before you obtained insurance for a specific amount of time, usually 12 months. This protects providers from paying for medical care for individuals who only obtain insurance when they develop an illness.

Dangerous activity clauses – If you sustain injuries or cause damage while participating in a dangerous activity, your health insurance company will not pay for the damages. If you die while participating in extreme sports, your life insurance company will most likely not go into effect. If you wreck your car while driving 120 mph in a 65-mph zone, your insurance will probably decline your claim.

Benefits that others can cover – If someone else can take responsibility for the cost of the damage, injury or death, your insurance won’t pay for it. This can be the case even if you don’t obtain help from the other source. Two examples of this are if there is a government program that covers the problem or if you could receive worker’s compensation.

Maximum amounts – Currently, your provider can limit how much they will pay before they will no longer cover a person’s expenses. Once President Obama’s health care reform goes into effect, health care insurance companies will not be able to set lifetime maximum amounts.

Understanding the Restrictions
Before you sign your plan, be sure to read and understand the limitations. For instance, if you are only obtaining insurance to pay for an elective surgery, you might be disappointed to find that your provider won’t cover it.

Another reason to know the terms and conditions of your policy is that it can empower you. If you need surgery but are worried your insurance might not cover it, you might be able to find that it is covered by reading your policy's terms and conditions. For example, having your tonsils removed can be considered an elective surgery; however, if your tonsils are causing other medical problems, a tonsillectomy can be an elective but necessary surgery, in which case your insurance might cover it. It can pay to find out.

Summary
Insurance companies create limitation clauses to protect it from paying for expenses that they deem unnecessary or unreasonable. Your provider can create its own exemptions, so it’s important to consider these clauses when shopping for an insurance policy. By understanding the clauses in your policy, you can save yourself money.