Question

a. List and describe the major types of exclusions typically found in insurance contracts.

b. Why are exclusions used by insurers?

Answer 1

A) Exclusions are that part of insurance contract which are not covered or are uninsured for any losses. The various types of exclusions are as follows:-

i) Excluded perils :- Any loss caused due to certain activities or effort like flood, earthquake, nuclear radiations or any disaster which is not under human control are not covered under insurance or excluded, specially for homeowner's policy.

ii) Excluded losses :- These are the losses excluded by the insurer. Example :- The losses which occur due to not taking reasonable care and effort to protect the damaged property.

iii) Excluded property :- These exclusion include certain properties or place which are not covered. For example:- cars are excluded in a homeowner's insurance.

B) Insurers use exclusion for following reasons:-

i) Some perils are not insurable

ii) Some perils are better covered under different category of insurance.

iii) Some coverage may not be required by insured.

iv) Extraordinary hazards and moral hazards present.