Glossary
Exclusion, defined
A clause that names a cause of loss, a type of property or a situation the policy will not pay for. It is how an insurer carves out risks it does not intend to price, such as flood and earthquake on a standard home policy, or intentional damage on almost any policy.
In practice
Exclusions decide many of the claims that surprise people. Ground water, earth movement, wear and tear, mold, business use of a home, and racing a car are common examples. Some can be bought back with an endorsement or a separate policy; others cannot be covered at any price.
The exclusion section is usually the longest part of the form, and it is the part to read before assuming a loss is covered.
A worked example
Suppose a monsoon storm sends water into a Phoenix home through the roof and, separately, through the front door from a flooded street. The roof leak may be a covered wind-driven rain loss under the home policy. The water rising from the street falls under the flood exclusion and is paid only if the homeowner also carries a flood policy. Same storm, two very different outcomes, decided entirely by the exclusion wording.
Applies to: Home InsuranceFlood Insurance