The general person’s life insurance education is understandably low if you’re not in the life insurance industry.
Clients, naturally, want to know that when the time comes, the life insurance company will make good on their promise.
As agents, we often get asked if life insurance has any exclusions.
What kinds of deaths are not covered by term insurance? Term life insurance will cover most accidental deaths and death by natural causes with few exceptions. If term life insurance does not cover death, it will be excluded in the policy by a rider.
Think about it; this is an industry that is built on trust.
Life insurance companies do not want to be on the front page of the newspaper, withholding death benefits to widows and orphans unless they have a good reason.
The best life insurance companies have a long history of paying their claims, and will often tout the number of benefits that they pay out to their policyholders.
Additionally, people often overestimate the cost of term life insurance from a reliable life insurance company.
You can use our free rate comparison tool to compare the rates of the most reputable life insurance companies in the United States.
Our article will cover the rare times a term life insurance policy will not cover death in great detail.
Feel free to skip ahead if to any relevant sections:
- You Lied or Misrepresented Yourself
- Suicide During the Exclusion Period
- You Die During the Commission of a Crime
- You Are Implicated in the Insureds Murder
- Acts of War
Top 5 Deaths Not Covered by Term Life Insurance
It is rare for term life insurance not to pay a death claim, but there are specific scenarios where the insurance company could contest the death benefit.
In addition to the list we compiled below, the life insurance company can carve out any death in what is known as an exclusion rider.
Exclusion riders are commonly used for dangerous activities, such as life insurance and skydiving.
For example, private pilots can purchase life insurance with a private aviation exclusion if they want to reduce their life insurance premiums by excluding that specific activity from a claim.
Outside of elective exclusions to your policy, we have compiled the top five major deaths that may be excluded by life insurance.
However, many people would agree that these are common-sense exclusions.
1. You Lied or Misrepresented Yourself
If you lied or misrepresented yourself on your life insurance application, the insurance company can deny your death claim.
Every life insurance policy has a contestability clause written into it that gives the life insurance company permission to investigate a death claim, usually within the first two years of the policy.
If the life insurance company investigates your death and finds that you’ve lied or misrepresented yourself, they can deny your claim, even if it has nothing to do with your death.
The life insurance company will essentially reevaluate if you would have qualified for life insurance coverage.
If you somehow concealed something from the underwriter that would have declined your application, the life insurance may deny your death claim.
In a best-case scenario, the life insurance company will re-rate you and deduct the premiums that you should have paid from your death benefit.
In a worst-case scenario, they will void your policy and return the premiums that you paid.
If your policy lapses and gets reinstated, that can reinstate the contestability period, so it is important to maintain your policy’s payments.
2. Suicide During the Exclusion Period
How to handle suicide is a delicate situation that the life insurance industry needed to grapple with.
After all, the life insurance industry doesn’t want to incentivize people to commit suicide like in Arthur Miller’s famous play, “The Death of a Salesman.”
However, mental illness is a terrible affliction that affects many Americans, as well as the risk of accidental suicide.
Now, the life insurance industry needs to consider physician-assisted suicide with its legalization in a handful of states.
The life insurance industry eventually settled on the policy of the suicide exclusion period.
The suicide exclusion period usually is two years.
During the exclusion period, if the insured dies due to suicide, the life insurance company may deny the death benefits.
Once the suicide exclusion period is finished, suicide is typically a covered death claim, unless excluded specifically by a rider for the lifetime of the policy.
Be sure that you carefully read the policy language of your contract to determine what your contract does and does not cover.
If you need help understanding it, reach out to your agent to go over it.
3. You Die During the Commission of a Crime
Have you ever heard the expression that crime doesn’t pay?
Well, crime doesn’t pay when it comes to life insurance.
The life insurance company may deny your death claim if you die during the commission or attempt of a crime.
The last thing life insurance companies want is to incentivize people to commit dangerous crimes.
In the past, life insurance companies were more strict about paying death benefits to people in the act of a crime.
However, some life insurance companies have loosened their position on paying death benefits to innocent beneficiaries of insureds committing a criminal act in recent years.
That being said, be sure to read through your policy to see what is and is not excluded.
4. You Are Implicated in the Insureds Murder
Life insurance companies may withhold the distribution of a death benefit is the beneficiary is implicated in the death of the insured.
Many states have slayer statutes on the books that mandate by law that murders cannot collect life insurance benefits on their victims.
Simply put, you cannot murder the insured to collect the death benefit proceeds.
If you are a suspect in the death of an insured, the life insurance company will delay the distribution of the death benefits until you are acquitted of the charges.
5. Acts of War
Some Life insurance companies will exclude acts of war in their policy language.
If you are in the military looking for a life insurance policy, you should read your contract language very carefully.
The last thing that you want is to deploy for war and die, only to find out that your life insurance policy does not cover war acts.
This is where working with a veteran life insurance broker comes in handy.
They will be able to recommend companies that have friendlier policy guidelines for military personal.
Often the difference in cost to buy a life insurance policy that covers war acts is not much.
In some cases, these policies may be less expansive then competitors!
Term life insurance is a great tool to protect your loved ones from financial ruin if you die prematurely.
Most life insurance companies reliably pay their death claims as long as you play by the rules.
If you lie or misrepresent yourself on your application, you are putting everyone you love at risk.
Additionally, if you engage in risky behaviors like suicide or criminal activity during the contestable period in your policy, the insurance company may deny your death claim.
However, these common-sense scenarios are rare in practice and often justified when they happen.
We wouldn’t recommend your concerns over the life insurance company paying the death claim to stop you from getting life insurance.
You can use our free rate comparison tool to view the rates of reliable life insurance companies that have a long history of paying their claims.
The greater risk to your loved ones is not the life insurance company not paying a claim, but you not having coverage in place when they need it the most.