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.
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Finance: What is a Pension?31 Views
finance a la shmoop. what is a pension? well it rhymes with tension, and likely
for good reason. if you're a teachers pension or a fireman's pension or [person wearing dark glasses writes something down]
another state employees pension that's backed up by a state that's going
bankrupt. Hi, California, Hi Illinois. well we're looking at you. all right people
well a pension is another term for a retirement fund. but what's special about
a pension is that the employer essentially forces you to put away money
for your retirement and then they invested for you.
how nice. or at least be sure you invest it well on a salary of 75 grand a state [gambling table shown]
employed ditch-digger might get a contribution of say 10 grand a year into
her pension, and that's each year 10 grand of forced savings for as long as
she you know digs ditches for the state. and in some states where the unions are
strong in the governing financial knowledge is weak the government
guarantees a minimum financial return on the pension investment made on behalf of
the employees. that is in California for example the state guarantees a 10% per
year return on their invested pension savings. if the invested return like [equation]
investing it in Wall Street and stocks and bonds and private equity funds and
all that stuff well if that invested return is less than that number less
than that 10%, then the state rights to the pinch and a check to cover the
incremental difference. yeah it's a huge Delta and it's well pretty much why you
a Californian Illinois you're going bankrupt remember. Jesus Saves
but Moses invests. [ Moses, holding stone tablets glares and demands interest]
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