Affordable Life Insurance Protection for Your Family
Term Life Insurance Policy Exclusions
In addition to the above provisions, there are also several common exclusions standard to most life insurance policies. These exclusions include a suicide clause, aviation exclusion, high-risk activity exclusion, and a war exclusion.
Common Exclusions of Term Life Insurance
If you aren't aware of the exclusions in your life insurance policy, your family could be left without a life insurance death benefit payout.
Here are some of the most common exclusions on life insurance policies, and what they mean for your coverage:
Most life insurance policies list suicide as a standard exclusion. Insurance companies will typically not pay out any death benefits if the insured person commits suicide within the first two years after the purchase of the life insurance policy.
However, beneficiaries of the policy may receive a refund of all of the premiums that have been paid for the life insurance policy.
This is a limitation in all life insurance policies to the effect that no death benefit payment will be made if an insured person commits suicide within the first two years that the life insurance policy is "In Force".
There is a one year suicide exclusion in some states like Colorado.
The only payment is a refund of premiums paid. This is to prevent someone from purchasing a policy and committing suicide with the intent of leaving their beneficiary with a substantial amount of money.
Dangerous Activity Exclusion
Some term insurance policies include dangerous activities in their list of exclusions.
Dangerous activities may include anything from sky diving to rock climbing to SCUBA diving or hang gliding.
The dangerous activity exclusion states that there will be no payment of any death benefits to the beneficiary if the policyholder dies while participating in a certain activity, such as auto racing, hang-gliding, or rock-climbing.
These exclusions are not as common, however, as most life insurers will cover you at a higher premium, if you regularly participate in these types of high-risk activities.
Illegal Activity Exclusion
Most insurance companies also include illegal activities on their exclusions list.
This means that if you die while doing an illegal activity, your insurance 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 at risk of not receiving the death benefits from your policy 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.
Usually, insurance carriers may not pay out a death benefit on life insurance if the insured person dies in a private plane crash. However, most (if not all) insurers may pay out your death benefit if you die in a commercial plane crash.
The aviation exclusion usually states that the policy will not pay if the policyholder dies in a private plane crash and not as a passenger on a commercial flight.
This is a common exclusion in life insurance policies indicating that coverage does not apply unless the insured person was a passenger on a regularly scheduled airline.
For example, if the insured person is killed while a passenger in a private plane crash, the aviation exclusion would apply, and the insured’s beneficiary would not receive a death benefit payment.
Act of War Exclusion
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.
This is a provision in life insurance policies that death benefits will not be paid in the event that the insured person dies from war related causes.
In lieu of a death benefit there may be a return of all premiums paid plus interest.
Other Types of Term Life Insurance Exclusions
Misstatement of Age Exclusion
If you lie about your age to your insurance company, they may not pay out your death benefit when you die.
Contestable Period Exclusion
Most insurance policies have a contestable period in which they can review the underwriting of the policy and determine whether or not information was misrepresented or withheld.
If the insurance carrier finds something, they may not have to pay out the death benefit.
Material Misrepresentation Exclusion
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.
It is always best to look over every aspect of your insurance policy before you sign your application for coverage, and make your first premium payment.
Make sure you understand these policy provisions and exclusions, and how they apply to your personal situation and coverage.
Exclusions on life insurance policies are used to limit the insurance company’s exposure to loss for activities the insurer does not wish to provide insurance protection.
Make sure you review the exclusions stated in your policy to understand how your coverage works and what may or may not be covered by your policy.