What does the term "exclusion" refer to in insurance policies?

The term "exclusion" refers to specific circumstances or conditions not covered by an insurance policy. In other words, exclusions outline what is not included in the coverage, thereby clarifying the limits of the insurer's liability. This helps both the policyholder and the insurer understand the boundaries of what risks are insured.

For example, common exclusions may include acts of war, wear and tear, and pre-existing conditions. By defining these exclusions, insurance policies ensure that policyholders have clear expectations regarding the protections they do or do not have. Understanding exclusions is crucial for both customers and brokers, as they help in assessing risk and determining the adequacy of coverage for specific needs.