What is the primary purpose of an "act of God" clause in an insurance policy?

The primary purpose of an "act of God" clause in an insurance policy is to outline limits on claims related to natural disasters. Such clauses are designed to clarify the insurer's obligations and the extent of coverage in the event of uncontrollable natural occurrences, such as earthquakes, floods, or hurricanes. By including this clause, insurers can manage their risk exposure and set specific parameters for what constitutes a natural disaster that may be covered under the policy.

This helps prevent ambiguity in claims related to these events and allows policyholders to understand which circumstances are insured against and which may not be covered. Consequently, it plays an essential role in insurance practices, as it can influence both the underwriting process and the subsequent claims process.