PSI Ohio Insurance Practice Exam

What is the term for the feature in a life insurance policy that states certain risks are not covered?

1. Endorsement

2. Exclusion

3. Limitation

4. Condition

The correct answer is: Exclusion

In life insurance policies, the term that identifies certain risks or circumstances that are not covered is referred to as an exclusion. Exclusions are specific provisions within the policy that outline situations or events for which the insurer will not provide benefits. This can include conditions such as suicide within a specified period after the policy is issued, or death resulting from participation in high-risk activities. Understanding exclusions is crucial for policyholders, as they define the boundaries of coverage and ensure that individuals are aware of what the policy does not protect against. This differentiation helps manage policyholder expectations and aids in the decision-making process when selecting a policy that aligns with personal needs and risk factors. Other terms like endorsement or limitation do not directly address the concept of risks that are entirely excluded from coverage, while conditions refer more to the stipulations that must be met for a policy to be in force or for a claim to be paid.