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Common Life Insurance Exclusions
Life insurance pays out a death benefit when you die, but there are a few common exclusions that could prevent your beneficiaries from receiving any money. If you are covered by a life insurance policy but your death falls under one of these exclusions, the insurance company may not have to pay out the benefit.
5 Common Life Insurance Exclusions
If you aren't aware of the exclusions in your life insurance policy, your family could be left without a life insurance payout. Here are five common exclusions and what they mean for you:
- Suicide - Most life insurance policies list suicide as an exclusion. Insurance companies will typically not pay out a death benefit if the insured person commits suicide within two years after the purchase of the policy. However, beneficiaries may receive a refund of the premiums that have been paid.
- Dangerous activity - Some term life insurance policies include dangerous activities in their list of exclusions. Dangerous activities can include anything from rock climbing to SCUBA diving to hang gliding.
- Illegal activity - Most insurance companies also include illegal activities on their exclusions list. This means that if you die while doing an illegal activity, your insurance policy may not pay out the death benefit. You might automatically assume that this exclusion is referring to illegal drugs or alcohol, but your beneficiaries could also be in trouble if you die in a car accident while speeding or not wearing a seat belt in a state where wearing your seat belt is the law.
- Aviation - Typically, insurance companies may not pay out a death benefit if you die in a private plane crash. However, most (if not all) insurance companies may pay out your death benefit if you die in a commercial plane crash.
- Act of war - This "common" life insurance exclusion isn't as common as it was before the 1970s, but you should still check your policy to see if it is included. This exclusion means that if your death is the result of war, the insurance company may pay out the death benefit.
Of course, not all life insurance policies have the same exclusions, so you'll need to check with your insurance provider to know exactly what your exclusions are. Other life insurance exclusions include:
- Misstatement of age - If you lie about your age to your policy provider, they may not pay out your death benefit when you die.
- Contestable period - Most insurance policies have a contestable period in which they can view the underwriting of the policy and determine whether or not information was misrepresented or withheld. If they find something, they may not have to pay out the death benefit.
- Material misrepresentation - This is similar to the contestable period but lasts for the entire term of your life insurance policy. Basically, if you withheld information or misrepresented yourself in order to get approved for a policy and the insurance company finds out, they can cancel your policy at any time.
Buying a Life Insurance Policy
Before you swipe your card on a life insurance policy, make sure you understand what exclusions your policy will have. You can get started by calling 800-966-7169 to speak with a licensed agent. Your agent will work with you to find a policy that meets your needs and your budget, and they'll make sure you understand exactly what your policy covers and what it doesn't.
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Applications for life insurance may be subject to acceptance by insurer. Issuance of the policy may depend upon answers to health questions. Rates and coverage amounts depend upon the carrier selected. Your policy may be subject to underwriting approval. You will receive only the benefit amount in the policy issued.