An exclusion is a provision of an insurance policy or bond that refers to hazards, circumstances, or assets not covered by the policy. Insurance exclusions are policy provisions that exclude coverage for certain types of risks or events. The main reason life insurance companies add exclusions is to protect them from the risk, namely, premature deaths, which can cost the company more money in the form of premature death benefits. Exclusions allow insurers to reduce the likelihood of paying a death benefit in certain situations.
Exclusions help keep premiums low by eliminating the possibility that certain insured people who are at risk of suffering a harmful situation will have to make large payments. The most common exclusion in health insurance is exclusion due to pre-existing illness (PED) or delay in coverage for some diseases. Even with hospital procedures, policies may not cover what they consider “cosmetic,” such as sex change operations, plastic surgeries, or dental surgeries. The IRDAI has created a simplified vocabulary to be used in policy documents and in the list of exclusions, greatly simplifying the exercise.
Most insurance policies exclude violations of the law, intentionally caused injuries, and crimes, as insuring these types of events would be against public policy. For example, general liability policies generally exclude liability coverage for defective products in the event of bodily injury or property damage caused by products you manufacture or sell. Many risks are excluded from one type of policy because that coverage is included in another type of policy. While insurance policies can help protect you from a wide variety of risks, not all risks can be insured, especially since many of them occur naturally over time.
Insurance exclusions have several purposes, but most apply to the risk mentioned in the categories listed below. It's also worth noting that risky hobbies, substance abuse, and misrepresentation (providing false information on your application) could prevent you from getting coverage in the first place or cause you to be charged a higher premium. If you're not sure what's excluded from your policy, contact your insurance company to check the details. Problems caused by wear and tear are excluded from physical damage insurance for cars and commercial property policies.
Exclusions are the established legal conditions under which the insurance company will not pay your claim, even in the case of events or risks covered by an insurance policy. A life, health, temporary or general insurance policy is taken out to cover an unknown risk. It's important to note that while some circumstances and health conditions may not be exclusive to your life insurance policy, they could be risk factors that could contribute to an increase in your premium. Most life insurance policies exclude death caused by war, adventure sports, or activities involving the consumption of alcohol or drugs, and criminal activities.
Some risks are not insurable because they are strenuous and can have a negative impact on several insured persons at the same time. There are some risks that insurers exclude because they can be easily mitigated or significantly reduced if the insured takes appropriate precautions or measures. For example, some life insurance companies used to exclude private aviation from the list of covered causes of death.
