What are ‘exclusions’ and ‘limitations’ and how do they affect my coverage?

An “exclusion” is a statement in an insurance policy which describes a condition or type of loss that is not covered by the policy. An exclusion is an exception to the general statement of coverage contained in the policy. For example, an auto liability policy typically states that it will pay damages for bodily injury or property damage for which an insured becomes legally responsible because of an auto accident. The same policy typically would have “exclusions” that provide, for example, that there is no coverage if the injury is by a person who drives the vehicle without a valid license or by a person driving the car under the influence of alcohol or drugs.

A provision found in some policies which is similar to an exclusion is called a “limitation.” A limitation also is an exception to the general statement of coverage but is applicable only under certain circumstances or for a specified period of time. For example, a health insurance policy often contains a “preexisting conditions” limitation, which states that the coverage does not apply to an illness or other medical condition that has been treated or diagnosed prior to the beginning of the policy. However, after the policy has been in effect for a specified period of time (often between 2 to 4 years), the limitation will no longer apply and subsequent treatment for the preexisting illness or condition will be covered.

Since exclusions and limitations “take away” some of the coverage of the policy, the law requires that they be clearly written and very specific.