Insurance is critical in one’s life. Without insurance, you can incur significant financial losses when the unexpected events happen in your life. For instance, auto insurance safeguards you and your car from the risks associated with driving. However, there are a lot of insurance terms that you need to be aware of to make informed decisions while purchasing your insurance. Some terms will even affect your insurance premiums hence the need to understand them. One such word is exclusion. So, what does exclusion mean and how does it affect your insurance?
Meaning of Exclusion
An insurance exclusion is primarily a policy provision that eliminates insurance coverage for specific risks. The term exclusion means that the insurance company doesn’t cover for the particular risks listed under the exclusion section. Typically, all things excluded from your policy are not covered by the plan. All insurance exclusions will be made clear in the policy wordings which are made available before you purchase the policy.
Therefore, before you purchase that insurance policy, make sure that it meets your specific needs. If you have any questions regarding the exclusions to your policy, make sure that you contact your provider. Insurance companies usually utilize the clause on exclusions to carve away all the risks that they are unwilling to insure.
Why Are Some Risks Excluded from Insurance Policies?
Insurance policy exclusions serve a wide range of purposes. Here are some reasons why insurance companies may be unwilling to cover specific risks:
- The risks are covered elsewhere: Typically, some risks that may be excluded under one insurance policy may be covered under another policy. For example, car liability claims may be excluded under the general liability policy but are covered under the commercial car insurance policy.
- Some Risks aren’t accidental: the primary purpose of insurance companies is to cover unforeseen events. Therefore, they will not cover losses that you may cause intentionally. For instance, both the commercial auto and the general liability policies may exclude bodily injury that the insured party may inflict on any third parties intentionally.
- Insurable for a fee: Some companies will be willing to cover specific risks if you are willing to pay an extra premium. A good example will be a loss that may be caused by theft orchestrated by one of your workers. Although such damages are usually excluded under the standard commercial property policies, you can cover them by purchasing the employee theft coverage.
- Maintenance issues: The other reason why exclusions exist is that some risks aren’t practical to insure since they occur naturally. A perfect example of such a risk is losses you may incur as a result of wear and tear. The damage that occurs as a result of wear and tear is usually excluded from insurance policies.