Final answer:
Exclusion in insurance refers to the practice of insurers refusing to cover certain risks to mitigate financial losses and provide suitable coverage.
Explanation:
Exclusion is when an insurer issues a policy that refuses to cover certain risks. This is done to protect the insurance company from high-risk situations that could result in substantial financial losses.
For example, an insurance policy for a home may exclude coverage for damage caused by floods if the property is located in a flood-prone area. By excluding this risk, the insurer limits its potential liabilities.
Insurance companies carefully assess risks and determine exclusions to maintain financial stability and offer appropriate coverage to policyholders.
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