We understand that life insurance is not the most pleasant subject to think about. And those who purchase a policy hope that they will never need it… or at least not need it for a very long time.
Nonetheless, if you pass away, your loved ones will undoubtedly be relieved that you purchased a life insurance policy.
Most people buy life insurance to protect themselves and their estate and also to provide financial security for their family members. Often, it is a form of financial security, as dependents will be left without financial support if the policyholder dies prematurely.
But what does life insurance not cover?
While life insurance covers death caused by accidental and natural death, there are some circumstances in which a payout is denied. Here in this article, we will tell you what is not covered by life insurance.
What Does Life Insurance Not Cover?
Maintaining your premium payments and passing away while your policy is still active will result in a payout from your insurer to your life insurance policy beneficiary. However, there are some circumstances in which an insurance company may withhold a death benefit, and these may be because:
You Lied To Your Insurers
Life insurance companies can withhold death benefits if you lie on your application (which is considered insurance fraud). A life insurance company may refuse to pay the death benefit if you commit life insurance fraud on your insurance application. Fraud includes lying about risky hobbies, medical conditions, travel plans, or your family’s health history.
If You Committed Suicide During The Contestability Period
In general, life insurance covers suicide. On the other hand, most policies include a “suicide clause,” which is also known as a contestability period. This clause usually applies during the first two years of coverage. Life insurance policies will not cover suicides that occur during this period.
In some cases, such as in the case of a drug overdose, this becomes more complicated. To deny coverage in the case of a drug overdose, life insurance companies must demonstrate that the overdose was intentional to avoid paying the death benefit to the policyholder.
The “Slayer Rule”
The slayer rule states that if the beneficiary of a policy murders the insured, the beneficiary will not be entitled to the death benefit. The slayer rule prohibits a payout to anyone who has murdered — or is closely associated with the murder of — the person insured from receiving compensation. A death benefit is paid to your contingent beneficiaries or your estate instead of the insured’s beneficiary(ies).
Deaths that occur while you are engaged in illegal activity may also be excluded from your insurance policy. That varies from insurer to insurer, so be sure to review your policy for specifics.
If You Have Been Involved In Acts Of War Or Terrorism
In some cases, insurance companies include an exclusion for deaths resulting from a war or terrorist activity. This exclusion is less common in life insurance than in other insurance types, but it does occur.
If You Pass Away Due To Being Involved In A Risky Activity/Hobby
If you die while participating in a high-risk activity, you may not be covered by your insurance policy, depending on the circumstances. Risky activities are recreational pursuits that have a higher risk of injury or death, such as:
- Scuba diving
- BASE jumping
- Hang gliding
- Auto racing
- Aviation
- Rock and mountain climbing
Several jobs also fall under the category of risky activities. These include logging, piloting, working on an offshore oil rig, being an offshore fisherman, and working as an underground miner.
If you engage in high-risk activities, whether for fun or for work, you can still purchase a life insurance policy. However, you may have to pay higher premiums as a result.
