Policy Exclusions vs. Policy Limitations: Understanding Your Insurance Policy

Property insurance is vitally important for homeowners and business owners in Colorado. Having the appropriate coverage ensures that you are financially protected in the event that your major investment is damaged or destroyed.

However, many policyholders incorrectly assume that their property insurance covers every possible kind of damage or loss. In fact, most policies have a variety of restrictions, and sometimes those restrictions are buried in fine print. These hidden restrictions could allow the insurance company to deny a claim or pay less than you think you deserve.

Specifically, you want to look for and understand two things: policy exclusions and policy limitations.

What Is a Policy Exclusion?

Simply put, policy exclusions are provisions in your property insurance policy explicitly stating that certain types of losses are not covered. These are usually found in a section labeled “Exclusions” or “Policy Conditions.” Policies covering commercial property might have exclusions listed elsewhere, too.

Examples of perils that are commonly excluded from policies in Colorado include:

• Flood damage
• Mold
• Pests
• Losses due to government action

To get coverage for things your policy excludes, you may need to add extra coverage (an endorsement) to your policy. In some cases, you may need to buy an additional policy. The cost of these endorsements and separate policies varies widely.

What Is a Policy Limitation?

Policy limitations are different from policy exclusions. Think of limitations as the maximum amount your insurer will pay out on a claim. Property insurance policies usually have different types of limitations:

• Dwelling limits: This is often based on how much it would cost to rebuild your home if it were a total loss. If you have a mortgage, your mortgage company will require you to have enough dwelling coverage to cover your loan amount at least.
• Personal property limits: This is usually 50% of your dwelling limit. It covers items like clothing, furniture, tools, electronics and more.
• Loss of use limits: Loss of use means expenses beyond the costs you would normally incur while waiting for your home to be repaired or rebuilt.
• Personal liability limits: This can protect you if you or a household member is found liable for an injury that someone suffers on your property.

Insurance Companies Must Write Clear Policies

Policy exclusions and limitations are a frequent source of conflict between policyholders and insurers. Far too often, insurers use vague language and then use that vague language to try to deny valid claims. This leads to disputes and puts policyholders in vulnerable situations as they wait for a resolution.

You should contact an experienced insurance lawyer if your insurance company is denying your claim because of unreasonable or hidden limits or exclusions in your policy.

Get Help From Our Denver Insurance Dispute Lawyers

If you believe the insurance company is treating you unfairly, call 303-534-0401 or contact us online to schedule a meeting with our attorneys. We can analyze your policy and take action to protect you.