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In Insurance, What Are Policy Exclusions?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 01 September 2016
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Policy exclusions are events and circumstances that are omitted from the scope of coverage provided by an insurance policy. Just about every type of insurance coverage has at least a few basic exclusions included in the terms and conditions, with some listed as general exclusions that apply across a wide range of events. In addition to general exclusions, there are also usually very specific exclusions that have to do with the particulars of the arrangement between the insured party and the provider that issues the insurance policy.

Many policy exclusions have to do with omitting coverage for events that have to do with acts of war. This would include any type of damage to property that is sustained as the result of an occupation by hostile forces or even a nuclear attack. In addition, damage to property or life that is sustained as the result of biological warfare is also likely to be found among the stated exclusions. It is not unusual for the policy exclusions to also involve outbreaks of diseases that are identified as part of a pandemic or epidemic.

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There are also policy exclusions that have to do with specific actions taken by the insured party or those who are somehow related to the business activities of that party. For example, an insurance policy may exclude situations in which the insured party is found guilty of committing illegal acts, such as fraud, or committing murder in order to receive benefits as the beneficiary of the murdered party. Theft is also often grounds for excluding benefits or providing protection, such as when an insured party steals from an employer.

Policy exclusions are also found in health insurance plans, usually in regard to any pre-existing health conditions related to the insured party. In some cases, the exclusions only apply for a specified period of time. Once that time period passes, those pre-existing conditions are partially or fully covered under the terms of the policy. For example, it is not unusual for a health insurance plan to not cover pre-existing conditions for the first nine months to a year after the coverage is secured, but then provide benefits for those conditions once the one-year mark has been reached.

The inclusion of policy exclusions helps to minimize the degree of risk that providers assume in order to provide coverage to individuals and businesses. In order to determine the range of exclusions that will apply in a given situation, providers often assess the circumstances surrounding the applicant and identify situations or events that could create an unacceptable degree of risk for the company. Those are then listed as exclusions and not included in the range of covered events.

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