What is Life Insurance Exclusion?

A life insurance exclusion is a situation or circumstance that prevents your beneficiaries from receiving your death benefit. This means that certain causes of death are not covered by the policy. While life insurance exclusions are regulated at the state level, insurance companies can decide which of those exclusions they include in their policies. Your exclusions will be listed in the policy at the time of application, allowing you to know which causes of death would not be covered by the policy before accepting a policy.

Why Are There Exclusions?

The main reason life insurance companies add exclusions is to protect themselves from risk — namely untimely deaths, which may cost the company more money in the form of an early death benefit. Exclusions are a way for insurers to reduce the likelihood of paying a death benefit in certain situations.

Common life insurance exclusions include death caused by:

Suicide: If the policyholder dies by suicide within a certain timeframe after purchasing their policy, then a life insurance suicide exclusion likely applies, and the insured’s beneficiaries are not eligible for death benefits. In most cases, the suicide clause is a two-year period, but this will be defined in the policy.
Acts of war: If a policyholder dies as a result of wartime activities, coverage may be denied.
Service in the military: Because military service may make a policyholder a higher risk to insure, this exclusion may be present in policies.
Aviation accident: Although fairly rare anymore, death caused by aviation accidents is a common life insurance exclusion.

The suicide clause is in place to prevent individuals from purchasing a life insurance policy when they are struggling with mental health disorders or are planning suicide. Most life insurance companies screen applicants for mental health conditions, like depression and anxiety, before they are approved for coverage. And while you will likely pay a higher premium if you are living with a mental health condition, you will still most likely be able to get a life insurance policy.

In the case of physician-assisted suicide, the same rule applies. If you live in a state where assisted suicide is legal, you must pass the two-year period before you can claim death benefits.

Accidental Death Policy Exclusions

Some life insurance policies, known as accidental death policies, only provide coverage for the insured if they die due to an accident. Causes of death related to illness, medical issues or chronic health conditions are not covered. These policies will define what constitutes an accident and may include exclusions due to death from:

Illegal activity: When someone dies as a result of illegal activity, their beneficiaries likely cannot claim their death benefits. This includes everything from drug deals gone wrong to DUI crashes.

Risky activity: Any death due to risky activities, such as skydiving or rock climbing, are usually counted as an exclusion.

Substance abuse: If a policyholder’s death is the result of drug or alcohol abuse, it may be excluded from their policy.
It’s also worth noting that risky hobbies, substance abuse and misrepresentation (providing false information on your application) could bar you from getting coverage in the first place or subject you to a higher premium.

Additionally, life insurance policies have a contest-ability period, in which life insurance companies can investigate your application and deny claims. This period is typically 1-2 years from the effective date of the policy. If you pass during the contest-ability period and the insurer determines you misrepresented yourself, or provided any false information to your life insurance company, it could completely void your coverage and no death benefits will be paid.

To learn more about getting the right coverage for your needs, give the Nickerson Insurance Agency a call today!