How is the term 'exclusion' defined in an insurance policy?

In an insurance policy, 'exclusion' refers to specific conditions or circumstances that are not covered by the policy. This inclusion identifies certain risks that the insurer will not assume, which helps to clarify the limits of coverage provided. Exclusions are critical because they define the scope of what is protected under the policy and allow both the insurer and the insured to understand which situations are outside the purview of the coverage.

By clearly outlining these exclusions, insurers manage their risk and limit their liability, while building trust with policyholders, as it sets clear expectations about coverage. This is particularly important for policyholders to understand, as it allows them to evaluate whether they need additional coverage or a separate policy for circumstances that may not be included in their current insurance agreement.