Exclusion
Definition:
A provision in a policy that eliminates coverage for specific risks or causes of loss.
Explanation:
Exclusions limit what an insurer is responsible for. Common exclusions include flood, earthquake, wear and tear, and intentional damage.
Example:
If a basement floods from rising groundwater, most homeowners policies exclude the damage unless flood insurance was purchased separately.
Why it matters:
This term affects how claims are handled and what payout a homeowner may receive.