Exclusion
Something your policy specifically will not pay for. Always worth reading.
Coverage is built in two motions. The insuring agreement says broadly what is covered, and the exclusions then carve pieces back out. Reading only the first half describes a much larger policy than the one that was actually bought.
Exclusions exist for reasons that are mostly structural. Some losses are near-certain rather than accidental, like wear and tear, rust, and mechanical breakdown. Some are catastrophic and correlated, hitting thousands of policyholders on the same day — flood, earthquake, war. Some belong to a different policy entirely, such as commercial activity or a vehicle driven for hire. And some are intentional acts, which insurance does not pay for as a matter of public policy.
The open peril versus named peril distinction decides how much weight the exclusion list carries. Under an open peril form, everything not excluded is covered, so the exclusions are the whole story. Under a named peril form, only listed causes are covered, and the exclusions act as a second filter on top of that list.
Some exclusions can be bought back. An endorsement such as water backup restores a slice of what the base form removed, usually with its own limit and sometimes its own deductible. Others cannot be added to a standard policy at all, which is why flood and earthquake are sold as separate policies.
Exclusions are also where the fine print does its most technical work. A single defined word can decide a claim: whether water arrived from above ground or below, whether a business was being run out of the home, whether a car was carrying a paying passenger at the moment of the crash.
In real life
A driver is rear-ended while carrying a passenger booked through a ride-hailing app. The personal auto policy excludes losses that happen while the car is being driven for hire, so the damage falls outside it. The claim moves to the rideshare company's commercial coverage, which carries its own deductible — $2,500 in some programs — for damage to the driver's own car. One excluded phrase moved the whole claim onto a different policy.
Common questions
What are the most common home insurance exclusions?
Standard policies commonly exclude flood, earth movement such as earthquake and sinkhole, wear and tear, rot, pests and vermin, most mold, intentional damage, damage from neglect, and business activity in the home. Wording differs by form, insurer and state, so the exclusion section of the actual policy is the only reliable list.
Can I add coverage for something my policy excludes?
Sometimes. Certain exclusions can be narrowed or removed with an endorsement, such as water and sewer backup or increased business property. Others are handled by a separate policy instead, which is how flood and earthquake coverage are normally bought. A few exclusions, like intentional damage, are not available for purchase in any form.
Why does homeowners insurance exclude flood?
Flood losses are correlated: one storm can damage thousands of homes in the same area at once, which is hard to spread across a pool of policyholders. Flood coverage is written separately, mostly through the federal National Flood Insurance Program or a private flood insurer, and those policies carry their own limits and waiting periods.
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Definitions describe how these terms are generally used across the U.S. market. Wording, limits and exclusions vary by insurer, policy form and state — the policy you hold is what controls. See the full Insurance Glossary.