Exclusion
An exclusion is a policy provision that removes or restricts coverage for a specified peril, person, property, location, service or condition. When one applies, the insurer may pay nothing for that part of the loss, and you carry it unless another policy, endorsement or exception provides coverage.
Also called: exclusions
An exclusion is a contractual provision that denies or restricts coverage for certain perils, persons, property or locations, according to the California Department of Insurance (opens in a new tab). If it applies, you may pay the entire excluded cost yourself or need separate coverage. The exact policy wording decides what is excluded and whether any exception brings part of the loss back into coverage.
How an exclusion changes what you are paid
In the NFIP claims manual, a flood policy has a $200,000 building limit and a $2,000 deductible, other insurance has a $30,000 sewer-backup sublimit and a $1,000 deductible, and the covered damage is $40,000. FEMA's proportional calculation is $200,000 ÷ ($200,000 + $30,000) × ($40,000 − $1,000) + $1,000 − $2,000, which equals $32,913.04, according to the FEMA NFIP Claims Manual (opens in a new tab).
Hover or tap a row to highlight it.
| Item | Limited coverage (NFIP example) | Fully excluded loss |
|---|---|---|
| Covered damage | $40,000 | $40,000 |
| Insurance payment | $32,913.04, before non-recoverable depreciation | $0 |
| Left for the policyholder | About $7,086.96 | $40,000 |
The flood example involves a limit and deductibles, not a denial under an exclusion. A fully excluded loss follows the second column: $40,000 loss minus a $0 payment leaves $40,000 with the policyholder.
Types of exclusions and what each changes
The form of the exclusion sets how much the policy pays.
- Complete exclusion. The insurer pays $0 for the excluded loss, service or condition.
- Partial exclusion or sublimit. The policy pays only up to a stated amount or for a narrower category of loss.
- Named-peril and open-peril coverage. Named-peril coverage pays only for listed causes of loss, so unlisted causes are excluded. Open-peril coverage generally pays for direct physical loss unless the policy excludes it.
- Endorsement. An exclusion can be added, removed or narrowed by endorsement for an additional premium.
- Waiting-period exclusion. A policy can exclude specified conditions for a stated period, and HealthCare.gov (opens in a new tab) describes individual pre-existing-condition exclusion periods as varying by state.
- Separate coverage. Flood, earthquake and other commonly excluded risks can require a separate policy or endorsement.
Adding coverage for an excluded peril can raise the premium, and accepting narrower coverage can lower the price, in amounts that vary by insurer and risk. California earthquake policies can exclude fire even when an earthquake causes it, while California law requires homeowners and renters policies to cover fire caused by or following an earthquake, according to the California Department of Insurance (opens in a new tab).
Where you will see an exclusion
Exclusions appear in auto, homeowners, condominium, renters, life, health, pet and commercial policies. Within a policy, look in the exclusions section, the insuring agreement that describes covered causes of loss, the conditions and limitations, and any endorsement that adds, removes or changes an exclusion.
The declarations page can identify a deductible, endorsement, limit or special exclusion. A quote or Summary of Benefits and Coverage lists them too, and a renewal notice shows when an exclusion or endorsement changes. The complete policy controls once it is issued, and a claim letter that says a loss, service or person is outside coverage is an exclusion at work.
The policy, certificate, endorsement and applicable law control over a marketing label or summary, and the policy is the document that describes what the insurer will pay, according to the California Department of Insurance (opens in a new tab). In health plans, excluded services (opens in a new tab) are services the plan does not pay for.
What Connecticut and New York law change
Connecticut sets rules for specific exclusions and documents. Conn. Gen. Stat. § 38a-307a (opens in a new tab) prohibits a terrorism exclusion in a condominium association master policy and sets conditions for terrorism exclusions in other commercial risk policies. A certificate of insurance cannot contain false or misleading information or create rights beyond the referenced policy, under Conn. Gen. Stat. § 38a-322a (opens in a new tab). For individual health policies, Conn. Gen. Stat. § 38a-505 (opens in a new tab) requires standards for provisions such as limitations and exceptions, so they are easier to compare. The Connecticut Insurance Department (opens in a new tab) regulates fully insured plans, not most self-funded employer plans.
New York sets rules by line of insurance. N.Y. Insurance Law § 2601 (opens in a new tab) prohibits knowingly misrepresenting pertinent facts or policy provisions without just cause, when it happens often enough to show a general business practice. A no-fault insurer that denies benefits for statutory exclusions must notify the applicant within 10 business days after the determination and give the reasons on the prescribed denial form, under Regulation 68, 11 NYCRR § 65-3.8 (opens in a new tab).
Questions to ask an agent or insurer
- What exact policy language creates this exclusion, and where is it located? The wording, endorsements and applicable law decide whether it applies.
- Is the exclusion complete, or does the policy provide a sublimit, exception or ensuing-loss coverage? An exclusion can deny one cause of loss while leaving a resulting loss covered.
- Can this exclusion be removed or narrowed by endorsement, and what separate coverage would address it? Flood and earthquake risks commonly need separate coverage or an endorsement.
- If you are denying my claim, which exclusion are you applying, and what facts support that decision? A written answer gives you something specific to review.
- Will this exclusion change at renewal, and will the change appear in the renewal documents? A renewal can add, remove or modify an exclusion even if the premium also changes.
Frequently asked questions
Four short answers on exclusions.
Is an exclusion the same as a deductible?
No. A deductible is your share of a loss the policy covers, while an exclusion removes or restricts coverage before the payment calculation. An excluded loss can fall entirely outside the claim payment.
Can an exclusion be removed?
Sometimes. An insurer may offer an endorsement, separate policy or additional coverage for a commonly excluded risk such as flood or earthquake, and availability and price vary by policy and state. California requires insurers writing homeowners coverage to offer earthquake coverage for an additional premium.
Can an insurer deny a claim by citing an exclusion?
Yes, when the exclusion applies under the policy and the law. You can ask for the exact exclusion and the supporting facts. A denial is not necessarily final, and the Connecticut Insurance Department explains its complaint process (opens in a new tab).
Is an exclusion the same as an exemption?
No. An exclusion removes or restricts coverage under an insurance contract, and an inclusion names what falls within coverage. An exemption (opens in a new tab) generally excuses a person from a legal requirement, such as the hardship qualification for catastrophic health coverage.