Aside from the practical reasons for excluding losses, insurance companies also use these provisions to avoid paying claims for certain uninsurable risks, or those that are best covered by other policies. For example, a property policy would not cover damages resulting from war. This type of loss is considered catastrophic and is often excluded from insurance policies.
Finally, insurance companies may also use these exclusions to prevent overlap between different types of policies. For example, a property policy may exclude damage to the building caused by a flood but would likely include this in its description of fire. This eliminates the potential confusion of which policy should provide coverage for this kind of loss.
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It is important to understand that insurance policies contain exclusions, and that the terms of a policy are not guaranteed in any way. While an experienced insurance professional can advise and assist with coverage decisions, it is still the responsibility of the insured to review and understand the terms of each policy they purchase. This is the only way to ensure that they are getting the most out of their coverage and are not exposed to unnecessary risk.
Endorsements
Insurance policies often have a separate section for conditions, which stipulate specific circumstances in which the insurance company may deny a claim. These conditions usually include such things as failure to cooperate with the insurance company in investigating or defending a liability lawsuit and providing proof of loss for certain losses. There are also some types of insurance that offer all-risk coverage, which means that most losses are covered unless they are specifically excluded. This type of coverage is generally more expensive than other types of insurance, so it is important to consider the likelihood that you would need the policy?s protection in the event of a particular situation before you buy it.
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In addition, the Declarations section of an insurance policy outlines key information about the policy including the type of policy, policy details, names of people covered, dollar limits on the policy and deductible, and the insurer?s contact information. The Declarations section also lists any endorsements that are included in the policy or have been added to the policy during its term or renewal.
For example, a commercial general liability (CGL) policy may exclude protection for employment actions, such as allegations of wrongful termination. These are professional liability losses that would be more appropriately addressed by a workers’ compensation insurance policy, and not the CGL. In addition, property insurance policies frequently exclude coverage for damage caused by floods, which is more appropriate for a separate property policy.
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