Exclusion

How it works

A policy grants coverage in broad terms, then uses exclusions to take specific things back out. Reading a coverage in order helps: the insuring agreement says what the policy pays for, the exclusions list what it doesn’t, and the conditions set the rules you have to follow. An endorsementEndorsementAn endorsement is a written change to an insurance policy that adds, removes or modifies coverage, such as adding an additional insured or a new location.Read the definition can then add an exclusion or give back coverage an exclusion removed.

Exclusions usually fall into a few groups:

• Causes of loss, like flood or earthquake on a property policy
• Kinds of property, like vehicles or property in your care, custody or controlCare, custody or controlCare, custody or control is a common general liability exclusion for damage to other people’s property while it’s in your possession, being stored by you or being worked on.Read the definition on general liability
• Activities or kinds of claims, like intentional harm, or liability you take on by contract unless it’s an insured contractInsured contractAn insured contract is a type of agreement, defined in general liability policies, under which liability you take on for someone else’s injury or damage claims can still be covered.Read the definition
• Risks another policy is meant to handle, like employee injuries on general liability, which belong to workers’ comp

Many exclusions have exceptions, which bring part of the coverage back. That’s why a single sentence can matter so much.

On property policies, exclusions work alongside the way coverage is written. An open perilsOpen perilsAn open perils policy covers direct physical loss from any cause unless the policy specifically excludes it, making it the broadest common form of property coverage.Read the definition policy covers any cause not excluded, while a named perilsNamed perilsA named perils policy covers damage only from the causes of loss it specifically lists, such as fire or windstorm, so anything not on the list isn’t covered.Read the definition policy covers only the causes it lists.

Example

Why it matters for a small business

Many “I thought I was covered” moments after a loss trace back to an exclusion. Before you buy, read the exclusions for each coverage and ask about any that touch how your business actually works. The guide to common exclusions covers the ones small businesses run into most, and each policy page, like general liability, lists what it doesn’t cover.