Life insurance is designed to provide peace of mind for the insured and to help meet the financial needs of the policyholder's beneficiaries in the event of death. Collecting on a life insurance is typically a simple process that involves a bit of paperwork. But insurance companies are also looking out for their best interests, so there are certain causes of death that will void a life insurance policy. These are known as exclusions.
Time Frame
Some exclusions are for a specified period of time after you purchase the policy. The most notable is the suicide exclusion, which will prevent the face value of the policy being paid to beneficiaries if the policyholder commits suicide within the first two years after the policy is issued. Instead, the insurance company will simply return any paid premiums.
Types
The main exclusions from a life insurance policy are activities considered high-risk or dangerous. There is an aviation exclusion, which will not pay if the insured dies while riding on a non-commercial flight; a war exclusion, which will not pay benefits if the policyholder dies in an act of war; and a dangerous lifestyle exclusion, which relates to activities such as skydiving, auto racing and rock climbing.
Geography
Some life insurance policies may be exempt if the policyholder dies in a country that has a high mortality rate due to disease or civil unrest. Anybody who travels to what are referred to as "restricted countries" should read their policy closely.
Warning
If the policyholders dies during the contestability period, which is a two-year period after the policy is issued, the insurance company is likely to investigate the matter. The insurance company will be looking for evidence of fraud or misrepresentation on the policy application. If the company deems that the policyholder was untruthful on the application, it may withhold paying the claim and seek to void the policy.
Covering Excluded Activities
Most activities that are excluded from a typical life insurance policy may still be covered through specific policies that deal with those activities. Obtaining coverage for activities that are exempt from typical life insurance policies may be done with a separate policy or via the addition of a rider to the existing policy.
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