‘Comprehensive’ policy, an oxymoron in insurance parlance?

Technical terms in insurance often say one thing, but mean something different

Nothing is as good as it sounds, and nothing is as bad as it sounds either, say the wise ones. In many instances, this holds good for insurance as well, with this financial product being particularly opaque and misunderstood.

The product is basically a legal contract promising an intangible benefit at a future date should a specified event take place. So, the layer upon layer of puzzlement induced by it is only to be expected.

It is often said in the context of insurance, that the big print giveth and the small print taketh away. Let us look at some of the big and small print that is somewhat misleading and confounding. Here is a term that sounds bad in insurance, but isn’t.

While risk is bad, in insurance the word refers to something that is covered. So that is good, right?

A life policy covers the risk of dying too soon, a pension policy covers the risk of living too long. Fire policies cover fire and allied perils, while hospitalisation policies cover the costs of hospitalisation. Since insurance presents the solution to managing risk, it has a positive connotation.

Here is a related term that sounds good, but doesn’t add up in practice.

The all-risk policy, typically covering construction and also fire and allied perils for large industrial projects, has a misleading name. Its breadth of cover is that it includes those risks not specifically excluded in the contract and, by that logic, standard exclusions like ‘act of god’ (an unforeseen catastrophe like flood, earthquake or storm which can’t be prevented or controlled by human beings), war or nuclear explosion are not part of the coverage and so, no, it does not cover everything under the sun, which is what we wish all insurance policies would do!