Benefits Payable Exclusion

This one is going to sound like an insurance company trying to get out of doing its job, but it only really comes up in very particular circumstances.

Generally speaking, the benefits payable exclusion is a clause in an insurance policy that excuses the insurer from paying benefits if the policy holder is able to use funds from somewhere else. Where it comes up is highly specific.

It's usually used in a kind of policy called a fiduciary liability policy. This covers pension plans and comes into play if the people who are part of the pensions ever sue, claiming something is wrong with the plan, like...it didn't set aside enough money to pay benefits.

Say someone sues the pension and is awarded an amount of money. If there is money available in the pension plan, that's where the funds come from to cover the judgment. The benefits payable exclusion prevents the fiduciary liability policy from taking effect. However, if the pension fund is insolvent and can't pay the judgment, the insurance company would be on the hook for the pay out.