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When you’re taking out an insurance policy, you might come across a few words that you’re not familiar with. Exclusion may be one of them. It’s a handy word to know, as it’s attached to important terms and conditions of your cover.

What is an exclusion?

Simply put, an exclusion is something that isn’t covered by an insurance policy. These exclusions might affect when you’re covered and when a benefit can be paid.

Types of exclusions

Here are some exclusions you’ll probably see in most life insurance policies:

• Health – Depending on the type of policy you get, there will likely be some health-related exclusions included. They’re often referred to as pre-existing conditions, but you may also see pre-existing diseases or health risks mentioned.
• Dangerous jobs – The work you do (even as a volunteer) might affect your cover. Some jobs may put people at more risk, such as fire-fighting, serving in the military or working with explosives. 
• Dangerous hobbies & activities – Some activities can be riskier than others. Whether you’re a pro or an amateur, you may find that things like skydiving, scuba and bungee jumping might not be covered by your life insurance. 

Why do exclusions exist?

We’ve mentioned it a couple times already, but having exclusions is one way insurance companies deal with risk. A lot of math goes into these decisions (and we won’t bore you with that) but think of it this way: Imagine Tom. He loves bungee jumping on holiday, but also likes taking photos of exotic birds. Bungee jumping may be generally safe, but it probably puts Tom in more danger than snapping wildlife pics does.

From an insurance company’s point of view, it’s riskier to insure Tom because of his bungee jumping hobby. If there were no exclusions in their policies, then the insurer would need to charge Tom more for a policy that covers the risk of bungee jumping (or any other daredevil hobbies he might try).

Certain health issues (things like high cholesterol or obesity) are treated the same way. Adding exclusions for health, as well as dangerous jobs, hobbies and activities, helps many insurance companies keep their prices low. 

What does this mean for me?

Exclusions don’t  mean you can’t buy cover. Often it just means that if your death is directly caused by something that’s been excluded, the benefit will not be paid.

You might find that some exclusions only last for a certain amount of time (say for the first five years you have your policy), but others may last forever. It’s wise to read the policy wording to learn exactly which exclusions apply and for how long.

We’ve only talked about the kinds of exclusions you might find in life insurance policies, but any insurance product you buy will likely have a few. Again, these details will be spelled out in the policy wording. 

Get to know your cover

Exclusions make up just one part of a typical life insurance policy. Reading the policy wording could help you better understand your cover, and when the benefit will or won’t be paid. It might also be a good idea to talk to your family about any exclusions on your life cover that could apply to you, so they won’t be surprised at claim time. 

Ready to get covered? Dollar Insurance always costs just $1 a day! Find out how much cover you can start with now. 

Disclaimer: The information in this article is for general use only. It doesn’t take into account your personal financial situation. If you’re unsure if this information meets your needs, you may want to seek professional financial advice.

The product information in this article was correct at the time it was published. Some details may have changed since then. For up-to-date product information, please visit the Dollar Insurance website.

About the author: Dollar Insurance is all about making insurance as painless as possible, so everyday Kiwis can make life cover and funeral cover a part of their plan.