As a business owner, securing proper insurance coverage is a top priority. It’s essential to protect your assets and ensure your business is protected from potential risks.
However, with any insurance policy, it’s important to understand the details, including exclusions, limitations, and risks that are not covered. Knowing these restrictions can help you make informed decisions and find the best coverage options for your business.
A business insurance exclusion is a policy provision that outlines specific risks that are not covered by the policy. These exclusions can limit or eliminate your coverage for claims related to specific risks, making it crucial to understand what your policy does and does not cover.
Some exclusions are non-negotiable, meaning they cannot be modified, while others can be modified or removed for an additional premium. Knowing the most common excluded risks can also help you make informed decisions.
In this blog, we’ll discuss the concept of business insurance exclusions in detail, including what they are, why they are included in policies, and how they can be modified or removed.
We’ll also cover the most common excluded risks and help you understand the importance of knowing what your policy covers and what it does not. Whether you’re a seasoned business owner or just starting out, this guide will provide valuable information that can help you make informed decisions about your insurance coverage.
What is a Business Insurance Exclusion?
A business insurance exclusion is a policy provision that outlines specific risks and how they limit your coverage. For instance, most auto insurance policies will not cover expenses from damages or injuries arising from the policyholder using their vehicle for racing.
Some exclusions are non-negotiable, while others only apply in specific circumstances. For example, a common exclusion in commercial property insurance is damage to vacant buildings, but only for vacancies exceeding 60 days. In some cases, exclusions can be modified or removed for an additional premium.
What are Common Excluded Risks?
Risks not covered under your policy typically fall into three categories: intentional criminal actions, maintenance-related risks, and catastrophic risks.
Intentional Criminal Actions: The exclusion of intentional criminal actions from your business insurance policy is a crucial aspect to understand. This exclusion includes events such as intentional damage, fraud, fire, or theft caused by an employee or owner of the business.
The insurance company will not cover claims resulting from intentional actions, as they are considered to be outside of their control.
It is important for business owners to take steps to prevent intentional actions from occurring, such as implementing proper security measures and conducting background checks on employees.
Maintenance-related Risks: Another common exclusion in business insurance policies are maintenance-related risks. These risks refer to damages or losses that result from a failure to properly maintain the property or equipment.
For example, if a pipe bursts due to neglect, the damages incurred may not be covered under your insurance policy. It is crucial for business owners to maintain their property and equipment regularly to prevent such losses from occurring.
Catastrophic Risks: Natural disasters such as hurricanes, earthquakes, and floods can cause significant damage to businesses. However, these catastrophic risks are typically not covered under standard business insurance policies.
Businesses located in areas prone to these types of events may need to purchase additional coverage, such as flood insurance, to protect their assets.
In addition, some insurance companies may offer catastrophic coverage for an additional premium, giving business owners the option to protect against such events.
Why do Policies Have Exclusions?
Exclusions help insurance providers avoid paying exorbitant fees on claims and lower premiums.
Policies may have exclusions if there are too many risks with the insurable, proper maintenance could have avoided damage, or damages are covered elsewhere in another type of plan or contract.
Exceptions to Provide Coverage
In some cases, exceptions to existing exclusions may allow policyholders to buy back coverage. Some plans may also provide coverage if certain conditions are met. Exceptions that are not absolute are negotiable with the insurance company for a fee or higher premium.
It’s important to understand the specific exclusions outlined in your business insurance policy and to communicate with your insurance company about your unique needs. They may be able to offer additional coverage or exceptions if required.
Locating Your Business Insurance Exclusions
Your business insurance exclusions can usually be found under the sections “Losses Not Covered,” “Property Not Covered,” or “Exclusions.” If you’re unsure about the language used in your policy, consult with a professional insurance agent or broker.
They can guide you through the plan and explain it in plain terms. If your policy provides multiple coverage types, such as property, auto, and business, there will be a separate list of exclusions for each type of coverage.
Working with a professional commercial insurance broker can help you understand confusing insurance concepts and terms. At Marathon Insurance, we believe that knowledge is power, and we aim to guide our clients to the best insurance policies that meet their needs.
For more information on commercial insurance and to find a broker in Markham and the GTA, contact Marathon Insurance at 844-429-0837 or contact us here. Our commercial insurance brokers are some of the best in the business. We work diligently to help find you the best coverage for your needs. Get in touch with us today for more information.