What is meant by "excluded risk" in an insurance policy?

The term "excluded risk" in an insurance policy refers to risks that are specifically outlined and excluded from coverage by the terms of the policy. This means that any loss or damage arising from these excluded risks will not be covered, and therefore the insured will not receive any compensation for such events. This delineation is important because it clarifies what the insurer is willing to cover and ensures that both the insurer and the policyholder understand the limits of the policy.

It allows the insurer to manage risk effectively by identifying which potential claims they will not accept. This clarity can help prevent misunderstandings when a claim occurs. By clearly defining excluded risks, insurance policies set out the boundaries of coverage and create an understanding of the terms under which the insurer will and will not compensate claims.