Insurance exclusion

What is an insurance exclusion?

An insurance exclusion specifies which events your policy won’t cover, essentially narrowing the scope of coverage. These exclusions help insurers avoid risks they find too high or unpredictable. Sometimes, your policy only lists the perils it covers, meaning everything else is automatically excluded.

Why are insurance exclusions part of an insurance contract?

Exclusions are a standard part of insurance contracts and serve several purposes:

• Risk management. Exclusions help insurance companies manage their risk exposure by excluding coverage for certain high-risk events or activities.
• Clarity. Exclusions clarify what is not covered, reducing misunderstandings and disputes during the claims process.
• Affordability. Excluding high-risk events or coverage scenarios can help make insurance policies more affordable for policyholders.

Which scenarios are typically excluded?

“Open peril” events are typically excluded from coverage. Examples of these include:

• Earth movements (e.g., landslides, earthquakes)
• Water damage from external sources
• Power failures
• Intentional acts
• War and terrorism
• Nuclear events

On the other hand, insurance policies often specify “named perils,” which means only those listed scenarios are covered. Common named perils include:

• Fire damage and explosions
• Weather damage
• Vandalism
• Theft

It’s essential to carefully review your insurance policies to understand what is excluded from your coverage and consider whether you need additional coverage or a rider to address any gaps in protection.

How NEXT protects your small business

At NEXT, we’re committed to small business owners and want to help you get the coverage you need. That’s why we offer customized business insurance that fits your needs.

Simply answer a few questions online and get your tailored instant quote within 10 minutes. Once you’re covered, you have immediate access to your certificate of insurance.

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