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Insurance 101: Understanding Your Policy Exclusions


You've no doubt been overwhelmed by the amount of fine print that your insurance policy has.

The main reason for the fine print is to lay out in detail what the insurance company will cover in case of a claim and what it won't.

It's important that you go through this with your insurance agent and that you especially understand the section called "Exclusions." 


Exclusions are provisions in a policy describing losses that the policy will not cover.

For example, a homeowner's policy does not cover losses caused by the use of cars.

While it may appear that the insurer includes these provisions to get out of paying claims, there are very sensible reasons why no insurance policy covers everything.

Not every person or business has the same exposures to loss. Because there are so many contingencies, insurers try to create insurance policies that cover the average scenario for each policy. And they learn over time what they should cover and what they should not.

Getting specialty coverage

Standard insurance policies contain coverage that apply to large groups of households and businesses, but they do not cover every possibility. Policyholders with additional needs usually can purchase additional coverage in the form or a rider or endorsement.

For example, homeowner's policies do not cover damage caused by water backing up from an overflowing sump or drain, but households that have basements with sumps or drains have the

Every coverage comes with an associated cost and the insurance company must factor in the costs of potential claims, expenses and profit for that coverage.

The more coverage a policy provides, the higher the premium. Without exclusions, people would be forced to pay for coverages they don’t need. Exclusions help keep the premium affordable. 

The uninsurable

Also, some losses are just not insurable. That's because insurers cannot predict when certain types of losses will happen and how much they will cost.

One typical exclusion is for acts of war. Armed conflict with another country or full-scaled terrorist attack could cause huge losses beyond the abilities of insurance companies to pay.

If the exclusions on your policy still leave you scratching your head, give me a call, and we can talk it over. 


Frances Zettl