Purchasing insurance is vital to cover losses resulting from unexpected events and accidents. Insurance products are designed to protect you, your family and your personal property. In case of a catastrophic event, the insurance company takes care of all the ensuing costs.

Purchasing an insurance policy doesn’t cover each and every one of your losses by default. Never be under that misconception. Insurance companies list certain events and incidents which are not covered by their policy. These specific set of events and incidents are known as exclusions. Exclusions help the insurance company to keep the average premium rate low by evading the possibility of paying for a few very expensive claims from high risk clients.

Each type of policy sold by insurance companies carries different exclusions. It is essential for every buyer to read the fine print of the policy and have a thorough understanding of every exclusion before deciding to purchase one.

Health insurance exclusions

Pre-existing health conditions form a large part of health insurance exclusions. A pre-existing condition is defined as a condition which has received medical attention prior to applying for the policy. Subsequent medical expenses directly related to an ailment arising out of a pre-existing condition are also excluded. Most health insurers have a specified waiting period after which they will bear some of the expenses related to pre-existing conditions. Pre-existing conditions also include long term injuries or chronic diseases resulting from war or a similar situation.

Coverage for certain specific procedures and ailments are also excluded. These may include vasectomy, hysterectomy, Calculus disease, cataract, etc. Alternative therapies like acupuncture, abortions, pregnancy care, cosmetic surgeries and additional hospital charges (extra blankets, band-aids, bed fees), etc. are common exclusions Congestive heart diseases, degenerative neurological diseases and certain types of cancer are usually excluded or find very limited coverage. Eye and dental care are excluded from health insurance coverage since there is a separate market for vision and dental insurance.

Don’t get deterred from buying health insurance by looking at so many exclusions. Always remember that coverage for some pre-existing conditions begin after a specified waiting period. There are state laws which also prevent insurance companies from imposing unfair exclusions on an insured.

A very well known and common set of exclusions under a homeowners policy are floods and earthquakes. Most people don’t bother to know beyond that. Some insurers exclude business related liability coverage for homeowners. Like flood and earthquake insurance, this coverage can be purchased separately. It is especially recommended for people who run home-based businesses.

Water damages are excluded under some policies. This may include water damage by seepage into the walls or the foundation of the home or water damage caused by a storm. Since water damage facilitates the growth of molds and spores and also induces rot, they are sometimes excluded from standard policies. Damage caused by insects and pests like termite and rats are a definite exclusion.

Sewage and water channel back-ups are some of the worst situations a homeowner might have to endure. Read your policy’s exclusions carefully since most insurers don’t cover such events.

It is a good idea to invest a few extra dollars for additional protection like flood and earthquake coverage. In case of a catastrophe, you will be adequately compensated. Take note of the fact that if a peril is not explicitly excluded by your policy, it doesn’t automatically mean that you are covered for it.

Auto insurance

Auto insurance can be broadly divided under a couple of heads – collision coverage and comprehensive coverage. Each has its own set of exclusions. The most common exclusion that people are not aware of is depreciation of the vehicle. Damage due to normal wear and tear is not covered by insurance policies. Parts which have been installed in the car by a third party or an unregistered body shop and after market parts are not covered as a rule-of-thumb. You might need to purchase a rider to cover such components.

Mechanical breakdown and failure of components like drive trains, engines, etc is excluded. You would have to check if your car’s warranty covers such damages. The risks of an unprecedented catastrophic events suck as earthquakes, floods and nuclear fallout are common exclusions on an auto insurance policy.

Cost of repair for damages caused intentionally cannot be claimed from the insurance company. If they find out that you had filed a claim after intentionally crashing your car, it would amount to insurance fraud which is a criminal offence. Damages caused by an accident where the driver had been charged with DUI or DWI is also liable for exclusion. In case there is any damage which has been caused by an unauthorized driver who is not insured under your policy, the insurance company can deny your claim.

Life insurance exclusions

Life insurance underwriters base their calculations on the age of the insured. It is best to not misstate your age since this will form a major ground for exclusion and also amount to insurance fraud.

In case the insured dies in the process of carrying out an illegal activity, the insurance company is exempt from paying the death benefit. This exclusion also applies in case the insured dies due to the consumption of illegal substances or alcohol abuse. The scope of this exclusion is somewhat open to interpretation. The exclusion may be applicable even if the cause of death cannot be directly attributed to the consumption of illegal or banned substances, simply because the insured was consuming such a substance at the time of his death.

Other common exclusions on a life insurance policy includes death due to engaging in dangerous and life threatening activities and death in an aviation accident where the insured was a passenger on a private aircraft.

Suicide of the insured is a slightly controversial ground for exclusion since suicide is not an unlawful act and the insured has the right to take his life if he so pleases. Most insurance companies have an ‘elimination period’ or a waiting period of about 2 years. The claim will not be paid if the insured commits suicide within this stipulated time period of 2 years.

Understanding your policy is the key to knowing if you are covered for all the perils you are expecting and even those which you are not. It is not prudent to wait around for a calamity to occur, and then find out that you are not covered for it. Read the fine print very carefully, try and understand the language of the policy, especially what is covered and what isn’t. Different policies have different exclusion clauses. You should take the time to sit down with your agent and understand each of them before you decide to buy a policy.

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