Understanding what your insurance policies cover and exclude is vital in case you experience a loss and need to file a claim. An insurance policy exclusion is a risk that isn’t covered by an insurance policy. Knowing your exclusions helps you determine which policies you need and what each policy covers. Below are common exclusions in General Liability and Property Policies and strategies on how to best read an insurance policy.
Common Exclusions in General Liability Policies
- Contractual Liability: Contractual Liability refers a promise that can be enforced in court. It’s common for businesses to take on the liability of others through contracts. This additional liability is only covered if the policy supports the contract language and if the liability is directly relevant to the nature of the business.
- Professional Liability: Claims related to Professional Liability, or malpractice, are typically excluded from General Liability policies. Companies can purchase separate policies to cover Professional Liability, also known as Errors & Omissions. While this type of insurance is most frequently associated with doctors or lawyers, Professional Liability coverage is important for many types of businesses that provide advice, design services, technology services, or engineering.
- Intentional Acts: Intentional acts are excluded from these policies. General liability policies only cover unforeseen risks. Intentional acts are defined as those committed deliberately.
Common Exclusions in Property Policies
- Floods: Floods are excluded in nearly all Property policies unless the coverage is specifically requested. Additionally, broader water damage exclusions might also eliminate coverage for seepage, sewer backup, and other types of water damage.
- Wear & Tear: Property policies don’t cover normal deterioration from everyday use. Insurance is designed to protect against unforeseen losses, and wear and tear is considered a foreseeable loss.
How to Read an Insurance Policy
- Start with reading the insuring agreements for definitions of what is covered in the policy
- Review the exclusions to understand the limitations of the insuring agreements
- Evaluate the conditions to understand your duties and responsibilities
- Inspect the endorsements
Importance of Insurance Advisor
By working with a qualified insurance and risk advisor that understands your business, you can be ensured that you have the right policies to cover your potential risks. We are insurance and risk management leaders with over 25 years of experience creating comprehensive programs. In addition to securing insurance policies, we work with our clients to design comprehensive risk management programs that help control their losses.