Insurance Exclusion
A policy provision that specifically removes certain risks, perils, or losses from coverage.
What is Exclusion?
An insurance exclusion is a contractual provision that explicitly removes certain causes of loss, types of property, persons, or activities from the scope of coverage. Exclusions are standard in all insurance contracts because they allow insurers to define and price risk accurately, exclude uninsurable risks (such as intentional acts), and avoid covering losses better addressed by other policies. Common homeowners exclusions include flood, earthquake, and normal wear and tear; standard health exclusions include cosmetic procedures and experimental treatments; auto exclusions typically cover intentional damage and commercial use of personal vehicles. Policyholders can sometimes purchase endorsements to add back excluded perils.
Example
A homeowner's house is severely damaged in a flood. Their standard homeowners policy contains a flood exclusion, meaning the insurer denies the claim. Because the homeowner did not purchase a separate flood insurance policy — either through the National Flood Insurance Program or a private insurer — they must pay all repair costs out of pocket.
Source: National Association of Insurance Commissioners — Understanding Your Policy