Benefits Payable Exclusion

Benefits Payable Exclusion A benefits payable exclusion is a clause in insurance policy contracts that removes the insurer's responsibility for paying claims related to employee benefits. Specifically, the clause protects the insurer from paying for benefits that could otherwise be paid from an alternative source, such as the employer's pension plan, health insurance plan, or other benefits plan. A benefits payable exclusion is a legal clause indemnifying an insurer against claims relating to employee benefits. These types of claims are regarded as an uninsurable business risk. In practice, courts will sometimes require insurers to cover such claims even if a benefits payable exclusion clause is in place. There are a few exceptions to the benefits payable exclusion. For example, the insurer may be responsible for paying claims if the plan is insolvent or if the funds in the plan are not available to pay the benefits. Additionally, the exclusion may not apply to claims that arise from the insurer's own negligence or misconduct. Real World Example of a Benefits Payable Exclusion: Emma is the owner of a mid-size company with several dozen employees. Over the years, she has taken active efforts to increase the wages and retirement benefits of her staff, regularly contributing to her company's employee retirement pension plan. Unfortunately, many of Emma's older employees reached retirement shortly before a major financial crisis. As a result, the pension funds that had been invested in stocks and other financial assets saw a sudden and dramatic decline. Despite her best efforts to fund the plan adequately, Emma now found herself unable to provide the retirement benefits expected by her recently retired employees, some of whom then sued the company. In court, Emma's insurer argued that due to the benefits payable exclusion clause of their contract, they were not responsible to cover the unpaid benefits payments. To Emma's surprise, however, the court ruled against her insurer, arguing that because the company's retirement plan had become insolvent despite the reasonable efforts of the company's management, the insurer would be required to honor the unfunded portion of the claims made by Emma's employees. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful