Which Types of Death Are Not Covered by Life Insurance – A life insurance policy pays out a lump sum of money to your dependents in the event of your death, which can be due to natural causes, accidents, or even suicide. However, certain unusual circumstances are not covered, including fraudulent activity, illegal behavior, or types of death specifically excluded in the policy.
Depending on the reason and circumstances of your death, your insurer will review the claim and decline to pay a beneficiary’s request for a death claim reimbursement. This article will examine Which Types of Death Are Not Covered by Life Insurance.
Which Types of Death Are Not Covered by Life Insurance
If your insurance policy is active and you have made your payments on time, the insurance company will pay the death benefit to your beneficiary when you die. However, there are specific circumstances in which the insurer may withhold a death benefit.
- If you were misled in your application or committed insurance fraud
- If you die while doing a risky habit or activity excluded by your policy.
- If you are killed by the policy’s beneficiary
- If you commit suicide during the suicide clause time.
- In rare instances of acts of war or terrorism
- If you die from an overdose during the contestability period
- If you die while engaging in an illegal activity.
- If you do not specify any beneficiaries on your policy
Illegal activities
Some life insurance policies exclude deaths that occur while the insured is involved in an illegal activity. This exclusion may apply to certain crimes, such as felonies, but not to others.
The contestability provision may also come into play here; if the death happens after the insurance has been in effect for two years, the death benefit may be paid out regardless. Each insurer has its own set of guidelines for dealing with illegal actions. Your agent may walk you through any exclusion in your insurance.
Acts of war or terrorism
While this is a rare occurrence, if you die in an act of war or terror, certain insurers may refuse to pay your policy’s death benefit.
This form of inclusion is less prevalent in life insurance than in other types of insurance.
If you are currently serving in the military, the situation becomes slightly more complicated. Your current deployment status and rank will determine whether you qualify for a private life insurance policy. If you have any doubts regarding this exclusion, ask your insurance representative for clarification.
Drug or Alcohol use
A life insurance policy frequently covers death caused by drug or alcohol usage. However, if a drug- or alcohol-related death happens within the two-year contestability period, the death benefit award may be jeopardized.
Within the contestability period, the insurance company reserves the right to review and verify the accuracy of your application information. If it discovers that you misled or suppressed facts concerning a history of drug or alcohol misuse when applying for coverage, it may refuse your claim and prevent your beneficiaries from receiving the death benefits.
Insurance companies may be exempt from providing coverage in cases of suicide by drug overdose, but they must demonstrate that the overdose was deliberate to deny the death benefit.
Suicide
This is typically covered by life insurance, with one exception: suicide clauses in life policies prevent payouts for suicide death within the first two or three years of the policy, depending on the firm.
Suicide clauses are put in place by insurers to prohibit applicants from committing suicide immediately after their life insurance policy takes effect. Suicide clauses vary per insurer, although they often last two to three years.
Lying or committing fraud
If you do not disclose risky habits, health conditions, travel plans, or family health history when applying for coverage, the insurer may refuse to pay the death benefit to your beneficiaries.
Withholding crucial facts from your application may be deemed life insurance fraud. Being honest and comprehensive when applying is the best way to ensure that your coverage will be paid out correctly.
Murder
If a policy’s beneficiary murders the insured, the slayer rule prevents them from receiving the death benefit. The slayer rule prohibits anyone from receiving a payout if they commit or are closely associated with the murder of the insured individual.
If this happens to you, you will not lose your insurance policy. Instead, the insurance company will distribute the death benefit to your contingent beneficiaries (also known as secondary beneficiaries) or your estate.
Risky hobbies
If you die while participating in a dangerous pastime (such as flying a private jet, bungee jumping, or scuba diving), your insurer may not pay the death benefit, depending on the terms of your policy.
Your insurer may exclude coverage for deaths resulting from participation in extremely hazardous activities, as specified in your policy. Private pilots, for example, may require an aviation exclusion rider to obtain life insurance coverage. If they die in a flying accident, their beneficiaries will not receive the death benefit.
If your policy includes any exclusion riders, you will be aware of them before the policy takes effect. Your loved ones will not have to worry about it once you are gone.
Frequently Asked Questions
Which life insurance policies cover all deaths?
Standard life insurance can pay out regardless of the cause of death, subject to specific policy exclusions. This type of life insurance coverage provides an “all-cause” death payout.
Who gets the money if the recipient dies?
If the beneficiary dies, who receives the money? In that situation, the payout will be distributed to any contingent beneficiaries named when the insurance was acquired. If there are no contingent beneficiaries, the death benefit will likely be paid directly to your estate.
Can I take money out of my life insurance?
If you have a permanent life insurance policy, you may be able to withdraw cash if the cash value is large enough. Term life insurance has no cash value component, thus you cannot withdraw funds from it.