Perils Excepted Explained

The purpose of insurance is to provide protection against the risk of uncertain events which would happen in a future point of time. Though the contract of insurance basically follows the rules of general law of contract, it is very clear that it has several inherent principles that have been attained over many years.

However, insurance contract is also a contract between two parties and there can be certain conditions and agreements which were included through mutual agreement by both parties.

Thus, in insurance contract, the insurer agrees to pay money to the insured or provide a service such as reinstatement of property on the occurrence of uncertain future event.

Hence, from the point of view of both the insurer as well as the insured, it is very important to identify the peril or perils by which the loss could occur on the subject matter in concern.

In general, it would be easier to identify the perils that are not insured against than the perils insured. Therefore, the insurers are keenly interested in including several conditions about the excepted perils in to the standard insurance policies.

However, there are no uniform definitions given to such excepted peril and the insurer could agree to cover those excepted peril too on the higher rate of premium.  

“The term excepted peril” in indemnity insurance contract such as fire and accident polices are generally stated on the policy itself.

Therefore, in terms of standard fire insurance policy, it does not generally cover any loss caused by any of the following occurrences namely,

a)    Earthquakes or volcanic eruption.

b)    War or war like operation

c)     Typhoon, tornado, storm or other atmospheric disturbance

d)    Riot, insurrection, rebellion, revolution.

In practice, many insurers face the difficulty in drawing the line between the peril insured and peril excepted in any insurance policy. Therefore, the various interpretations have been given to the term ‘excepted peril’ by different jurisdiction of the world.

However, in Marine insurance policies, some risks are expressly excluded and in general, the ship should be seaworthy. Therefore, some acts of god, inherent vice, negligence and loss or damages attributable to willful misconduct have been excluded as excepted perils.  

Thus, a natural event that is not caused by human action or events cannot be predicted usually exclude by the insurer from indemnity insurance policies by stating those are acts of God. But, sometimes, insurers leave room to cover some natural events such as storms, lightening and floods which can be considered as acts of god as well.