What Are Life Insurance Exclusions? | Bankrate (2024)

As you get older, having a life insurance policy in place may allow you to leave money to your loved ones if you pass away. However, not everyone knows that there are certain exclusions that might prevent your beneficiaries from claiming your death benefit. If you have a life insurance policy, it’s important to know what those exclusions are so your loved ones can avoid any surprises following your death.

Common life insurance policy exclusions

A life insurance exclusion is a situation or circ*mstance that prevents your beneficiaries from receiving your death benefit. Essentially, it means that certain causes of death are not covered by the policy. Life insurance exclusions are regulated at the state level, but insurance companies can decide which of those exclusions they include in their policies. Exclusions will be listed in the policy at the time of application, so the insured will know which causes of death may not be covered by the policy before accepting a policy.

The main reason life insurance companies add exclusions is to protect them 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.

You might be surprised to learn what situations may not be covered by insurance. Some 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.

James Miles, consulting staff fellow for the Society of Actuaries, says virtually every life insurer typically includes the same outright exclusion in its policy: a suicide clause.

“Depending on the state, it’s usually a two-year suicide clause. If you die by suicide within the first two years of the contract, the beneficiary would receive the premiums back but not the death benefit,” he says.

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 contestability period, in which life insurance companies can investigate your application and deny claims. This period is typically one to two years from the effective date of the policy. If you pass during the contestability 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.

How do I know if I have life insurance exclusions on my policy?

Knowing what your life insurance covers may be vital. After all, some types of life insurance will cover you for your entire life — which means making premium payments for your entire life, too. As such, not understanding your life insurance exclusions could prove to be a costly mistake.

One way to learn more about the exclusions on your life insurance policy is to read through your contract. Although it may be dense, your contract will spell out precisely what is and isn’t covered on your life insurance policy. However, life insurance is complex, and contracts may be hard to decipher. With that in mind, it may be a good idea to meet with your life insurance agent, so they can break it down for you.

Do life insurance exclusions change over time?

Over the years, life insurance companies have altered their definition of risky behavior based on global, economic and socially-driven changes. For instance, some life insurance companies used to exclude private aviation from the list of covered causes of death. However, as private aircraft became safer, many life insurance companies eased up on the rules for most policyholders. Today, some life insurance companies offer an aviation rider for recreational pilots.

It’s important to note that although some circ*mstances and health statuses may not be exclusions on your life insurance policy, they could be risk factors that may contribute to a higher premium. Additionally, every insurance company is different, so it’s important to read through your contract to understand your policy limitations.

Frequently asked questions

    • Life insurance exclusions are typically included in a policy automatically. Policies that include many exclusions, such as accidental death policies, may be lower cost, whereas choosing a traditional whole life policy with few to no exclusions will likely increase your premium.

    • People who engage in hobbies or activities deemed risky can still secure life insurance coverage. While some life insurance companies may decline extending coverage to a high-risk individual, other companies may offer a policy at a higher premium, offer a policy with an exclusion to hazardous activities or offer a rider such as Adventure Activities Coverage to enhance the policy.Activities deemed high-risk include BASE jumping and race car driving, but some professions like loggers and steel workers will also fall into the high-risk category. Speaking with your life insurance agent openly about your occupation and hobbies can help you secure the right type of life insurance for you and your family.

    • Life insurance exclusions are included in full policy language that you receive when you purchase a policy. Before you purchase life insurance, you can ask your agent to review all policy exclusions with you. If you have any questions about what’s covered, you may want to contact your agent who can walk you through the details of your policy.

    • Most insurance policies include a suicide clause that states the policy will not pay out the death benefit if the policyholder commits suicide within a certain period of time after the policy is purchased. Typically, the exclusionary period is two years, but it can vary between insurance companies. In the event of a policyholder’s suicide within the exclusionary period, the life insurance company will usually refund the premiums paid on the policy. This even applies to term life policies. However, group life insurance policies do not typically have a suicide clause.

What Are Life Insurance Exclusions? | Bankrate (2024)


What are the exclusions of life insurance? ›

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.

What is an example of an exclusion on an insurance policy? ›

“Open peril” events are typically excluded from coverage. Examples of these include: Earth movements (e.g., landslides, earthquakes) Water damage from external sources.

What is typically not covered under life insurance? ›

Suicide: A payout won't apply if you commit suicide within the first two years of purchasing your policy. Acts of war and terrorism: Deaths that result from war or terrorism aren't usually covered.

Which of the following is a common life insurance policy exclusion? ›

Deaths due to natural disasters or calamities like earthquakes, hurricanes, tsunamis, and floods are usually life insurance exclusions. Thus, in case the policyholder dies due to any of the natural calamities, the nominee will not be paid the life cover amount.

What disqualifies life insurance payout? ›

The good news is that you likely won't need to worry about having a claim denied if you're truthful with your life insurance company from the start. Instances of lying, criminal activity, or dangerous behavior that's not disclosed upfront could all be reasons life insurance won't pay out.

Does alcoholism void life insurance? ›

It's possible to buy life insurance if you have a history of alcohol abuse. However, you'll usually have to be sober for three years if you want to be approved for term or whole life insurance coverage — and you'll have to pay higher premiums. Premiums are typically paid monthly or annually.

What is a list of exclusions? ›

The Office of the Inspector General's (OIG) List of Excluded Individuals/Entities (LEIE) provides information to the health care industry, patients and the public regarding individuals and entities currently excluded from participation in Medicare, Medicaid and all other Federal health care programs.

What is not typically excluded from life policies? ›

Final answer: Death due to a plane crash for a fare-paying passenger is typically NOT excluded from life insurance policies, whereas death while involved in a felony, due to war and military service, and self-inflicted deaths often are.

What are some common clauses and exclusions in life insurance contracts? ›

Important Clauses and Exclusions One Should be Aware of
  • Grace period. The grace period dictates that the policy will not be forfeited in case of missed premium payment. ...
  • Free Look period. The Free Look period is another clause that benefits the policy owner. ...
  • Revival clause. ...
  • Suicide exclusion clause.

Does life insurance pay if murdered? ›

In fact, most murders are covered. The only time that beneficiaries wouldn't receive a payout in the event of the policyholder's murder would be if the insurance company investigated the death claim and found there was fraud or criminal activity, or the beneficiary was the one who committed the murder.

Does life insurance cover funeral costs? ›

Does life insurance cover burial costs? Yes, life insurance policies will pay a lump sum when you die to a beneficiary of your choice. That money can be used to pay for your funeral or for any other general financial needs of your survivors.

What is the average life insurance payout after death? ›

What is the average life insurance payout? The average life insurance payout in the U.S. is about $168,000, according to Aflac. However, the payout of your life insurance policy will depend on the amount of death benefit that you pay for, as well as any money borrowed against the policy prior to the payout.

Why do insurers place exclusions in life policies? ›

Life Insurance Exclusions that Protect the Company

They ensure that insurers can continue to offer affordable premiums to the majority of policyholders by mitigating the potential for excessive claims or misuse. A life insurance policy is a legal, binding contract.

Where are exclusions found in an insurance policy? ›

While most exclusions can be found after the main coverage sections in your policy (named perils, personal property, personal liability, additional coverage, and medical payments to others), you'll also notice exclusions in the definitions, conditions, and endorsem*nts sections.

Top Articles
Latest Posts
Article information

Author: Delena Feil

Last Updated:

Views: 5912

Rating: 4.4 / 5 (45 voted)

Reviews: 92% of readers found this page helpful

Author information

Name: Delena Feil

Birthday: 1998-08-29

Address: 747 Lubowitz Run, Sidmouth, HI 90646-5543

Phone: +99513241752844

Job: Design Supervisor

Hobby: Digital arts, Lacemaking, Air sports, Running, Scouting, Shooting, Puzzles

Introduction: My name is Delena Feil, I am a clean, splendid, calm, fancy, jolly, bright, faithful person who loves writing and wants to share my knowledge and understanding with you.