For many people, life insurance is the only financial safety net their family has in the event that they pass away. That means it is essential to understand the factors that could interfere with your beneficiaries receiving your life insurance payout. In this month’s blog, we’re explaining what a life insurance exclusion is, common exclusions, and how they can affect your policy.
Key Takeaways
- Life insurance exclusions are circumstances that allow the life insurance company to deny your life insurance claim.
- Suicide, illegal activities, and undisclosed health conditions are common life insurance exclusions.
- Life insurance exclusions can affect your policy by preventing your beneficiaries from receiving payouts.
What Are Life Insurance Exclusions?
Life insurance exclusions are a crucial part of your life insurance policy, as the fate of your beneficiaries’ payout could depend on one of them. An exclusion is a situation or circumstance that allows the life insurance company to deny a claim or payout. Yes, even if you never miss a premium payment and make them all on time, if you pass away under an excluded circumstance, your claim could be denied. So, what death circumstances do most policies exclude?
Suicide Clause
Most life insurance policies have a suicide clause stating if the policyholder takes their own life within a specific time period, then the insurer can deny the claim. The timeframe is usually two years, but not always. Check your policy to know if this clause is included and what the specifics are. This is a standard exclusion to deter someone who may be struggling with mental health from applying for a policy with the intention of ending their life soon.
Dangerous and Illegal Activities
It’s not a bold assumption to presume that people who engage in dangerous activities are more likely to have a premature death that could have been avoided. As such, life insurance companies try to discourage such behavior by excluding it from coverage. This usually includes high-risk hobbies like skydiving, bungee jumping, rock climbing, etc. Speak to your advisor or take a detailed look to know if any of these activities or others are exclusions in your policy.
Additionally, if you pass away engaging in illegal activities or in the commission of a crime, your insurer may be able to deny your claim. For example, if you’re fatally shot while robbing a bank or breaking into someone’s house, it is unlikely your beneficiaries will be able to claim death benefits.
Acts of War or Terrorism
If your death is the result of wartime acts, terrorism, or military service, the death benefits may be denied. However, active military members are usually able to receive a policy that considers the dangers of their career through the Department of Veterans Affairs or other private insurers.
Undisclosed Preexisting Health Conditions
It’s the policyholder’s responsibility to be completely transparent on their life insurance application. If not, the dishonesty could affect their policy later on. Life insurance applications can be very detailed in the questions asked about your lifestyle and health. If, for instance, you’re a smoker, but you say “no” on the part of the application that asks if you smoke, your claim could be denied if you pass away from smoking-related causes.
How Do Exclusions Affect Your Policy?
Knowing the details of your policy and what exclusions it includes can be the difference between your claim being approved or denied and your family having the financial support they need in an already stressful time. Don’t leave them unprepared. Although it’s not the most exciting literature, reading your policy in full and speaking with your advisor about any questions you may have can ensure your loved ones receive the coverage they deserve.
Get Help with Denial Disputes from Sinclair Law Firm
If your life insurance claim has been unfairly denied, don’t hesitate to contact Sinclair Law Firm. Our experienced Alabama life insurance Attorneys can provide the legal guidance you need in this difficult time. Additionally, if you want more clarity on the exclusions included in your policy or help challenging what you believe may be an unfair exclusion, we can help you in those areas as well. Call or send us a message today!