This article was written prior to 15 March 2021, before the launch of the new Financial Advice Regime, and was published for information purposes only. It is not being actively promoted by Dollar Insurance. Dollar Insurance does not provide financial advice about the suitability of their products and cannot take into account your personal situation or goals. Before you decide to take out a Dollar Insurance Policy, you should read the relevant Policy Wording document which contains the terms, conditions, and exclusions of the Policy, and seek independent financial advice, if required, to ensure the insurance policy is suitable for you.

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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. 

About the author: Dollar Insurance is all about making insurance as painless as possible, with easy to get funeral cover, for just $1 a day. 

Disclaimer: The information provided in this article is of a general nature only and does not take into account your personal situation or goals. You should consider whether the information is appropriate to your needs and seek independent financial advice, if required, to ensure an insurance product is suitable for you.

Any product information is correct at the time this article was published. For current product information, please visit the Dollar Insurance website.