Deaths not Covered by Life Insurance
Deaths not Covered by Life Insurance
Normally, most types of deaths are covered by life insurance policies and as long as you pay your premium to keep the policy active, death benefit is paid out to your family. Coverage includes deaths from natural causes, such as heart attack, cancer, infections, kidney failure, stroke, old age, or other medical conditions. Accidental deaths, like those resulting from motor vehicle accidents, drowning, poisoning, fires, or similar incidents, are also covered, entitling beneficiaries to the payout. But keep in mind, if you ONLY have accidental death benefit coverage (without any other type of life insurance like whole life or term life), death benefit will only be paid out if you die out of an accident. In cases of murder, the policy pays out unless the beneficiary is involved in the act. Life insurance typically covers suicide as well, although if it occurs within the initial policy period (also known as the contestability period)—usually the first two years—benefits are not paid.
In essence, to understand the situations where death benefit doesn’t pay out, first you have to understand the concept of contestability period. The life insurance contestability period is a time right after your policy is approved when the insurance company can review any claims to check for inaccuracies in your application. If they find false or incomplete information, they may deny the claim, which could mean you’d need legal help to get the coverage paid out. Life Insurance policies in most instances after this period is over, will pay out (with some exceptions that we will discuss here). This period usually lasts two years, though it can vary by state and company, so it’s a good idea to have a knowledgeable broker go over all the details with you.
When will a life insurance policy not pay out?
Firstly, if your policy is expired or if you have missed payments making it inactive somehow, your death benefit will not be paid out. And secondly, if you leave no beneficiaries or your beneficiaries happen to pass away before you, your life insurance will not be paid out. So it is paramount to get life insurance that you can keep paying for down the line. This is why teaming up with one of our experienced brokers helps because they take your needs into consideration, have access to a range of products rather than being tied to one company like insurance agents. They can get you affordable life insurance as well as keep an eye on any lapses making sure your family is fully protected at all times. Here are some other situations when the insurer may withhold a death benefit:
Suicide and Overdose
Life insurance usually covers suicide, but most policies include a “suicide clause” that blocks a payout if suicide occurs within the first two or three years of the policy, depending on the insurer (this is the contestability period we discussed earlier). This clause is designed to discourage applicants from taking out a policy with immediate intent to end their lives. The waiting period for suicide clauses varies but is generally two to three years. Similarly, if death occurs due to an overdose within the contestability period, the insurance company may investigate the claim to ensure all information provided on the application was accurate. Depending on their findings, the insurer might deny the payout if they determine any details were misrepresented. If you die while participating in an illegal activity, the insurers may also refuse to pay the death benefit.
Murder
As mentioned earlier, if a beneficiary is responsible for the insured person’s murder, they are legally barred from receiving the death benefit or any financial assets tied to the estate under the ‘Slayer Rule’. This rule prevents a payout to anyone involved in, or closely connected to, the murder of the insured. In such cases, the death benefit is not forfeited but instead paid to the contingent (or secondary) beneficiaries listed on the policy, or, if no alternates are named, to the insured’s estate.
Lying/Committing Insurance Fraud
If you’re not upfront about high-risk hobbies, medical conditions, travel plans, or family health history when applying for coverage, the insurer may deny your beneficiaries the death benefit. Withholding important details can be considered insurance fraud. To avoid any issues with your policy’s payout, it’s essential to be honest and thorough on your application.
Dangerous/Risky Hobbies
If you pass away while engaging in a high-risk activity—such as flying a private plane, bungee jumping, or scuba diving—your insurer may not pay the death benefit, depending on your policy’s terms. For activities deemed especially risky, the insurer may include an exclusion clause that blocks payment if death occurs during such activities. For example, private pilots may need an aviation exclusion rider, which would prevent a payout if they die in a flying accident. Any exclusion riders will be disclosed before your policy takes effect, so your loved ones will be aware of these details in advance.
Rare Cases: Death in War/Act of Terrorism
In rare cases, life insurance policies may exclude coverage if death occurs due to an act of war or terrorism, meaning the insurer might not pay the death benefit. However, this exclusion is less common in life insurance than in other types of coverage, and again this is why we cannot stress enough the importance of an experienced broker who can explain all these things to you. For active military members, eligibility for private life insurance can depend on rank and deployment status,so it’s best to ask an insurance broker if you have questions about this exclusion.
References https://www.investopedia.com/which-types-of-deaths-are-not-covered-by-life-insurance-5094285
https://www.policygenius.com/life-insurance/reasons-life-insurance-wont-pay-out
https://www.marketwatch.com/guides/life-insurance/life-insurance-contestability-period
https://www.empower.com/the-currency/life/unclaimed-money-from-deceased-relatives