Exclusions in Insurance

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Definition

Any risk or eventuality that is not covered under the insurance policy is called exclusion.

Description

Insurance is a contract that promises to pay the insured in the event of loss that may arise from risks that are covered under the policy. The policy pays for the loss if the policy is in continuance and the premium is paid.

Example

Amit took a term insurance plan for Rs.1.5 crore to protect his family in the event of his death. A term plan covers the family for deaths that may arise due to unintentional accidents. After 5 years of premium payment, Amit died in a road accident. The insurance company paid for the loss and gave his family a sum of Rs.1.5 crores.

But had Amit died due to suicide in the second year or later, the insurance company would have rejected the claim filed. It is because, suicide is an exclusion under the term plan.

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