What is a common exclusion for insurance coverage?

Catastrophic events are often considered common exclusions in many insurance policies because they can result in extraordinarily high claims that threaten the financial stability of the insurer. Policies may limit coverage for such events or exclude them altogether due to the unpredictability and severity associated with natural disasters like floods, earthquakes, or hurricanes.

Insurers manage risk by excluding coverage for these types of events, especially since they can affect large populations simultaneously, leading to a rise in claim frequency. This helps to maintain affordable premiums for policyholders who do not face such risks.

In contrast, minor accidents, fires, and mild weather events typically fall within the coverage of standard insurance policies, as they are more controllable and manageable claims that insurance providers anticipate regularly. This is why catastrophic events stand out as a common exclusion in many insurance contracts.