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Video — What Costs Are NOT Covered By Life Insurance?

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If you've lost someone covered by life insurance, it's worth understanding what is not covered. If the covered party provided false health information on their application or didn't pay premiums, the policy may be invalid. Conditions of death matter as well. Risky behavior or activities or death in a war zone or country not covered in the policy may invalidate benefits. Coverage in the case of suicide depends on when the policy was purchased. Look up the contestable period of the policy. Their age at death has to be within the range covered by the policy. If they outlived their life insurance, there may be no benefits. Finally, if the deceased. Conflicts with the policy, the will overrides policy designations such as named beneficiaries.

Life Insurance Does NOT Cover...

What Is Excluded From Life Insurance Coverage?

Having life insurance provides financial security for one's loved ones in the event that one's life is cut short. An insurance company guarantees to pay a one-time sum of money to the people who you designate as the beneficiaries of your life insurance policy if you pay them a monthly payment for life insurance. Your loved ones are able to put the money toward things like paying off debt, funding further education, supplementing their income, and covering funeral costs with it.

When you join up to give these benefits to your family, you will be required to sign a contract stating that you agree to the conditions of the agreement. In most cases, the terms of a life insurance policy will outline the conditions under which the insurer will not honor a claim. If you are aware of the exclusions that come with your life insurance policy, you can have more peace of mind knowing that your loved ones will be provided for in the event of your passing.

In general, life insurance protects against losses that result from:

  • The death was due to a natural cause, such as a heart attack, an infection, or cancer.
  • Things like automobile wrecks, unintentional drug overdoses, poisoning, and drowning are examples of accidents that can cause death.
  • Murder
  • Suicide
  • Pandemics

Most life insurance does not cover:

  • Accidental deaths that occurred as a result of dangerous activities such as mountain climbing, flying a plane, or underwater diving
  • The number of fatalities that can be attributed to high-risk occupations, such as forestry, mining, and oil drilling

Even if you participate in dangerous hobbies or have a job that puts you at an elevated risk of harm, it is typically possible for you to purchase life insurance coverage despite these factors. It is very possible that your premium will be more than what other people who are the same age and have a similar state of health would pay. If you were to pass away from something unrelated to your employment or activities, the policy would still pay the benefit to your beneficiary.

What are the Circumstances Under Which a Life Insurance Claim Won't Be Paid?

Even if you pass away from one of the scenarios that are covered by your life insurance policy, there are still some situations in which a claim may not be paid out. Some cases of suicide and murder, as well as information fraud and periods that have expired, fall under the category of causes that do not qualify. There is further explanation given below.

Early in the Course of a Policy  Suicide

The contestability term on most life insurance plans lasts somewhere between one and two years. If you were to take your own life within this period of time, the insurance company would not pay out. This provision's goal is to forestall the practice of persons purchasing life insurance with the idea of committing suicide so as to leave their fortune to their relatives after their deaths.

Assault and homicide

According to the Slayer Rule, if the beneficiary of your life insurance policy is found guilty of your murder, it is highly unlikely that they will be entitled to the life insurance payout. Instead, the funds would be distributed to those you have designated as your contingency or backup beneficiaries. Even if the person who was accused of killing you was found not guilty of the crime, the insurance company can still pay out on your policy.

Applicants' Applications Contain Misleading Information

According to insurance fraud legislation, it is against the law to lie on an application for life insurance. If you are detected lying, you could go into legal difficulties, and your insurance coverage will most likely be revoked as a result. In most cases, the insurance company would deny the claim if it is discovered after the decedent's passing that the deceased gave inaccurate information to the insurer. When applying for life insurance, be sure to offer correct information regarding the following areas:

  • That of your health
  • The medical background of your family
  • If you do smoke or not
  • If you partake in the use of alcoholic beverages or recreational drugs
  • Taking part in dangerous pursuits or activities
  • Working in a dangerous industry
  • Your travel plans
  • Exposure to a contagious illness

Expired Terms

Term life insurance and whole life insurance are the two primary coverage options provided by life insurance companies. A whole life policy is one that covers you until the day you pass away. The coverage provided by term life insurance is only in effect for a predetermined amount of time before it needs to be renewed. The terms of most insurance range from one to thirty years. Your life insurance policy will not pay out if you pass away after the period of your term life policy has ended and you have not renewed it.

Are Death Benefits the Only Purpose of Life Insurance?

The cash value of whole life insurance accumulates over the policy's duration. Having this kind of insurance could be beneficial to you before you pass away in the following ways:

  • Assisting in the provision of security for a loan. There is a possibility that you could use the cash value of your life insurance policy as collateral for a loan. You can borrow money from a financial institution in most cases, and the amount you can borrow is often equivalent to a set percentage of the cash value of your policy. In the event that you are unable to repay the loan, the financial institution may take possession of the insurance in order to collect the money.
  • Paying for the necessary things. You may be able to make a withdrawal from the cash value of your whole life insurance policy if you are in need of additional funds to supplement your income during retirement or to pay for a significant purchase or expense. You may also be able to get the full cash value of the policy by either surrendering it or selling it.

An accelerated death benefit rider, often known as an ADB rider, is available on some life insurance plans. If you have been diagnosed with a terminal illness and satisfy the other criteria set forth by the policy, you will be eligible to receive a payout in one lump sum if this provision is included in your policy. The one-time payment is subtracted from the payout that is received upon passing away. When you pass away, your loved ones will receive a smaller inheritance, but you will have sufficient funds to pay for any necessary medical care or other costs.

Marco Giordano
Writer, Researcher & Video Editor
January 27, 2023
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