Exclusions in a business insurance policy

Aug 29
3 min read

Updated: 2 days ago

Introduction

A claim is submitted and refused. The owner is certain the loss is exactly what the policy was bought for, and the insurer points to a clause on page nineteen that excludes it, or to a condition about security that was not met.

Neither party is behaving unreasonably. The policy always said this, and nobody read past the summary of cover. Exclusions and conditions are where insurance is actually decided, and they are the only part of the document that will ever matter to you. The schedule describes the intention; the exclusions describe the outcome.

1. Exclusions in a business insurance policy are where the cover ends

Read them first.

The schedule tells you what is insured and the exclusions tell you what is not. The second list is shorter, more specific and considerably more informative about whether the policy suits your business.

2. Understand the difference between an exclusion and a condition

Both can defeat a claim.

An exclusion removes a type of loss from cover. A condition is something you must do — maintain locks, keep records, notify promptly — and failing it can invalidate a claim for a loss that was otherwise covered.

3. Check the security conditions carefully

The most commonly breached.

Specified locks, alarms set when unoccupied, keys not left on the premises, and how vehicles are secured. These are precise requirements and a claim following a break-in turns on whether they were met.

4. Look for exclusions specific to your trade

Where generic policies fail.

Work at height, hot work, particular materials, certain premises types, or specific activities. A policy bought quickly online may exclude the thing your business does most, and nobody will mention it until you claim. Online purchase in particular removes the conversation where this would surface.

5. Note the wear, maintenance and gradual damage exclusions

The largest category of declined claims.

Insurance covers sudden and accidental events, not deterioration, poor maintenance or faulty workmanship. A roof that failed gradually, or equipment that was not serviced, generally falls outside cover.

6. Check what happens when premises are unoccupied

A trap for seasonal and growing businesses.

Most policies restrict cover after a stated period of unoccupancy, frequently around thirty days, and impose additional conditions. Businesses closing over a holiday period or between tenancies are routinely caught.

7. Read the excess and any special excesses

Not all the same.

A standard excess applies generally, and higher ones frequently apply to specific perils such as water damage, subsidence or theft. A claim can be worth less than the applicable excess without the owner realising. Water damage and theft excesses in particular are frequently several times the standard one.

8. Watch for exclusions added at renewal

The change nobody notices.

Insurers withdraw or restrict cover between years, and the renewal documentation notes it. Assuming this year's policy matches last year's is how businesses discover a new exclusion during a claim.

9. Ask directly what would not be paid

The most productive question for a broker.

Describe three plausible losses for your business and ask whether each would be covered. The answers are specific, immediate and far more useful than reading the wording unaided.

Where an exclusion matters to your business, ask whether it can be removed or bought back. Many can be, for a modest additional premium, and owners frequently accept an exclusion as fixed when it was simply the default option on a standard policy.

Conclusion

Read the exclusions and conditions, because they determine whether anything is paid.

Understand that conditions can defeat a claim just as exclusions do, check the security requirements precisely, look for exclusions specific to your trade, recognise that wear, maintenance and faulty workmanship are generally excluded, note the unoccupancy restrictions, check for special excesses on particular perils, watch for exclusions added at renewal, ask your broker what would not be paid on three realistic scenarios, and find out whether an exclusion that matters can be bought back.