Which Types of Death Are Not Covered by Life Insurance?

Death insurance isn't a fun topic to think about, but those who purchase it will definitely despise being forced to think about it. However, if death occurs, your loved ones will be pleased that you purchased a policy. Life insurance pays off on natural deaths and accidents, yet some situations could prevent a payout. Keep reading for some more information about life insurance.

Key Takeaways

• A life-insurance policy protects your loved ones from financial loss if you die. Nevertheless, it did not offer some payment in every instance. 
• Life insurance policies primarily take care of deaths from natural causes and accidents.
• You may forecast that your insurer will refuse to cover your beneficiaries if you lie on your application.
• Life insurance protects against suicide, but only if a bit of time has passed since you purchased your policy.
• If your death is a result of a dangerous hobby, your insurance company may or may not cover benefits, depending on your policy's details. 
• The "Slayer Rule" prevents a death benefit payout to your beneficiary if they kill or are related to you murdering.

What Is Life Insurance?

A life insurance policy is a contract between the policyholder and an insurance company. In exchange for paying regular premiums, the insurer pays a death benefit to your beneficiaries if you're killed. Life insurance coverage provides a financial safety net, and it could replace your wages or be used to pay off the mortgage or college costs for your loved ones.

Term Life Insurance vs. Whole Life Insurance

There are two primary types of life insurance term and whole (permanent life).

Term insurance is the simplest and most cost-effective kind of life insurance. According to the Insurance Information Institute, it pays if you die during the policy's term, which is usually from one to 30 years. Once the term expires, you can renew or covert this policy to permanent coverage, or allow the policy to terminate.

Whole life insurance pays a death benefit no matter when you die, even if you have had the life insurance coverage for a period of time or you are old. Although you pay higher premiums, you get the security of knowing your loved ones are protected for your entire life. A whole life policy might accumulate dollars after some time, and in due time, you can collect payments from your insurer.

What Does Life Insurance Cover?

Generally speaking, a fatality arising from an natural reason, a disease, or an accident is covered by the insurance payout. Here's a rundown of deaths that are covered under life-insurance policies.

Natural causes

Life insurance coverage covers death due to natural causes. If you die of a heart attack, cancer, an infection, kidney failure, stroke, old age, or some other natural cause, your beneficiaries will receive the insurance payout.

Accidents

Your life insurance policy will pay out your beneficiaries death benefits if you die as a result of a motor vehicle accident, drowning, poisoning, accidental drug overdose, or another tragedy.

Murder

Your beneficiary will be compensated in the event of your assassination if the beneficiary killed you or was dependent on you.

Suicide

Life insurance coverage covers suicide, and your beneficiaries will receive the death benefit unless the cause of the death occurs during the "contestability period" usually the first two years of the policy if it's the only exclusion in the policy that prohibits it.

Pandemic illness

If you have a pre-existing policy and die of COVID-19, it is classified as a natural cause, and the insurance company will pay the benefits to your beneficiaries. However, if you have a new policy during a pandemic and deviate from your application about your health condition or influenza exposure, then the insurer may deny your request for payment.

Which Types of Deaths Are Not Covered by Life Insurance?

There are a number of reasons your insurer may not be liable to your beneficiaries, one of which is that you're still alive. There are times when your beneficiaries may be unable to collect benefits:

Risky activities

Depending on the circumstances of the case and your situation, you won't be covered if you die during a dangerous activity. Activities with a high risk of injury or fatality are risky recreational activities, such as:

• Scuba diving
• BASE jumping
• Hang gliding
• Auto racing
• Aviation
• Rock and mountain climbing

The risky occupations category includes some occupations, such as working as a logger, pilot, oil rig worker, fisherman, and coal miner.

Regardless if you participate in risky activities either for fun or for work, you can still purchase a life insurance policy, but you may end up paying more in premiums. And, depending on how risky the activity is, your insurance company may add a exclusion to the policy that prohibits payments if you die while participating in that activity.

Murder

Under the "Slayer Rule," if your beneficiary murders you or is connected to your murder, they won't be eligible to receive the death benefit. Instead, your insurer will distribute the death benefit to your contingent beneficiaries or to your estate.

Suicide

In general, life insurance typically covers suicide. However, most policies have a "suicide clause" or contestability period during the first two years of the agreement. Life insurance won't cover a suicide that occurs during this period. Things can get trickier if a policyholder dies of a drug overdose during this time. However, in this case, the insurance provider would be required to prove that the overdose was deliberate to withhold the death benefit.

Other Reasons Life Insurance Won't Pay Out

Lying on the application

Life insurance providers may reject payment if you lie on your application. For example, the company could cancel your policy, and your beneficiaries' welfare would be affected as a result. If you lie about who you are:

• Family health history
• Medical conditions
• Alcohol and drug use
• Risky activities
• Travel plans

Not naming a beneficiary (or they predecease you)

If you do not have designated beneficiaries or if they predecease you, the death benefit payout can be quite complicated. In this case, it will go to your estate instead of your relatives.

It is important to designate primary and contingent recipients to receive the life insurance death benefit in your absence. Otherwise, those benefits are subject to probate, and they may not end up where you intended.

Conclusion

Life insurance can provide financial security and peace of mind for your loved ones. In general, life policies cover the occurrence of natural causes, illness, and accidents. Still, insurers may restrict benefits in specific instances. Be sure to familiarize yourself with the fine print of your policy so that you are aware of what is covered and what isn't.