What Won’t Life Insurance Cover

While life insurance is designed to protect loved ones if the policyholder dies, the various policies do not cover all contingencies. These exemptions are designed to protect the life insurance company from paying on policies that are high-risk due to certain circumstances. Insurance companies may choose to provide coverage or offer an additional rider for some of these exclusions, but they come with much higher premium rates. There are also companies that specialize in insurance specifically for high-risk individuals, but before deciding on this type of policy, people need to know what their life insurance won’t cover.

Suicide Clause

To prevent those considering suicide from purchasing a policy and then carrying through with their plans, there is usually a suicide clause included in all life insurance policies.  Life insurance cover for the full face amount of the policy is only available after two years from the purchase date; in other words, that is typically when the suicide clause ends.  Generally, only the premiums which have been paid are refunded to the beneficiaries before the two year anniversary period.  This waiting period is meant to “weed-out” the people who purchased the plan solely to pay off their debts after a suicide.

Aviation Clause

Learning to fly a private plane or being a passenger in one may be an exciting experience, but life insurance companies consider these behaviors very risky.  Most life insurance covers only passengers on a regularly scheduled commercial jetliner, because this type of flying is not thought to be as high risk.  Normally, beneficiaries will receive only the return of premiums the policyholder has paid after a private plane crash.  Aviators can still get life insurance, but the premium prices will probably be much higher and may still have a stipulation denying coverage in the event of a plane crash; this type of rider can sometimes be removed for a hefty premium increase.

War Clause

In the event that the policyholder dies from a war-related cause, death benefits will generally not be paid out to the beneficiaries.  However, under certain circumstances, premiums may be returned with interest or there may be a refund equivalent to the cash value of the policy.  If there is not a war clause on the policy at the time it is signed, insurance companies cannot retroactively add the clause.  They put this life insurance cover on during times of war and typically the clause is removed at the end of the war; once the clause has been removed, it may not be reenacted at a later date.

Dangerous Activities

Rock-climbing, paragliding, and auto racing may be exciting and thrilling sports for the adrenaline junkie, but insurance companies view these as dangerous activities.  Insurance companies vary on which activities their life insurance cover fully, but typically people who indulge in pursuits like these have a higher than average risk for injury or death. Even if an activity is listed as a high risk pursuit, it may still be covered, depending on how often the policyholder indulges in this activity. It also depends on whether or not the policyholder is certified or licensed, and if they have a lot of experience.

Life insurance companies are for-profit companies and it is not in their best interest to protect at-risk individuals.  While exclusions are not as prevalent in insurance contracts as they once were, these factors can still keep a death benefit from being paid to beneficiaries.  When completing an insurance application, be as truthful as possible to inform insurance companies of any possible issues so they can create a policy accordingly.  This can ensure a payout and prevent your loved ones from financial disaster during a time of need.

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