Exclusion
An exclusion is a policy provision that specifies conditions, circumstances, or types of losses that are not covered by an insurance policy, eliminating the insurer's obligation to pay for those particular claims.
Exam Tip
Exclusion = NOT covered. Know common exclusions: war, intentional acts, flood, earthquake. Pre-existing conditions excluded in most policies EXCEPT ACA-compliant major medical.
What is an Insurance Exclusion?
An exclusion is a provision in an insurance policy that eliminates coverage for specific risks, perils, persons, property, or locations. Exclusions define what the policy does NOT cover and help insurers manage risk while keeping premiums affordable.
Purpose of Exclusions
| Purpose | Explanation |
|---|---|
| Risk Management | Excludes uninsurable or catastrophic risks |
| Premium Control | Keeps policies affordable by limiting scope |
| Fraud Prevention | Discourages moral hazard and intentional losses |
| Regulatory Compliance | Meets legal requirements |
| Clarity | Defines coverage boundaries clearly |
Types of Exclusions
| Type | Description | Example |
|---|---|---|
| Peril Exclusions | Specific causes not covered | Flood, earthquake, war |
| Property Exclusions | Specific items not covered | Vehicles, business property |
| Loss Exclusions | Specific losses not covered | Intentional damage |
| Condition Exclusions | Circumstances not covered | Pre-existing conditions |
| Location Exclusions | Places not covered | Unoccupied buildings |
Common Property Insurance Exclusions
| Exclusion | Description |
|---|---|
| Flood | Requires separate flood policy |
| Earthquake | Requires separate endorsement |
| War/Nuclear | Generally uninsurable |
| Intentional Acts | Deliberate damage by insured |
| Wear and Tear | Normal deterioration |
| Neglect | Failure to protect property |
Common Health Insurance Exclusions
| Exclusion | Description |
|---|---|
| Cosmetic Surgery | Elective procedures |
| Experimental Treatment | Unproven treatments |
| Pre-existing Conditions | Eliminated by ACA for major medical |
| Self-Inflicted Injuries | Intentional self-harm |
| Work-Related Injuries | Covered by workers' compensation |
Common Life Insurance Exclusions
| Exclusion | Description |
|---|---|
| Suicide Clause | No coverage within first 2 years |
| War/Military Action | Death in combat |
| Hazardous Activities | Skydiving, racing (may be excluded) |
| Material Misrepresentation | Fraud on application |
Exclusion vs. Limitation
| Aspect | Exclusion | Limitation |
|---|---|---|
| Coverage | NO coverage at all | Partial/capped coverage |
| Payment | Zero payment | Reduced payment |
| Example | Flood not covered | $50,000 jewelry limit |
How to Handle Exclusions
| Option | Description |
|---|---|
| Buy Separate Policy | Flood, earthquake insurance |
| Add Endorsement | Remove exclusion with rider |
| Accept the Risk | Self-insure the excluded peril |
| Risk Avoidance | Eliminate the excluded exposure |
Exam Alert
Exclusion = policy provision that ELIMINATES coverage for specific perils, property, or conditions. Know common exclusions by policy type. Exclusions can often be removed by adding an endorsement (for additional premium). The ACA eliminated pre-existing condition exclusions for individual major medical insurance.
Study This Term In
Related Terms
Endorsement
InsuranceAn endorsement (also called a rider) is a written amendment attached to an insurance policy that modifies, adds, or removes coverage from the original policy terms.
Rider (Insurance)
InsuranceA rider is an optional add-on to an insurance policy that provides additional benefits or modifies coverage for an extra premium, allowing policyholders to customize their protection beyond the base policy.