Life License Qualification Program (LLQP) Practice Exam

When an insurance policy includes provisions to refuse coverage for certain risks, this is known as a(n):

1. Elimination

2. Exclusion

3. Limitation

4. Exception

The correct answer is: Exclusion

When an insurance policy specifies certain risks for which coverage is not provided, this is typically referred to as an exclusion. Exclusions are essential components of insurance agreements, as they clarify the circumstances or types of losses that are not covered by the policy. By outlining exclusions, insurers manage risk and help ensure that policyholders are clearly informed about the coverage they can expect. This approach protects both parties—the insurer from excessive claims for high-risk events and the insured from misunderstandings regarding their policy coverage. Understanding exclusions is vital for policyholders, as it aids in identifying the limitations of their coverage and allows them to make informed decisions regarding additional coverage or endorsements that may be necessary to protect against those excluded risks.