When you pass away, you expect that your life insurance policy will provide financial protection for your loved ones. For example, by buying term life insurance, you would expect that your policy will provide death benefits to your beneficiary if your death happens during the period of time (the term) of your policy. How you die, however, can play a role in your life insurance following your passing.
Depending on the timing or circumstances of your death, your life insurance company may decide not to pay your death benefits. Life insurance companies often reserve the right to deny the death benefits if you’ve previously lied or misrepresented information on your application. To avoid an unfortunate situation, it’s best to understand exactly how and when a life insurance policy may be denied.
Reasons Why Life Insurance Won’t Pay Out
As long as your life insurance premiums are paid on time and your policy is active, your beneficiary should expect to receive a payout from the insurance company. If you die as a result of illness, natural causes or an accident, the insurance company will typically pay the death benefit with no issue. Reasons a life insurance company may decline to pay the benefit can include:
- Lying on your application, such as failure to disclose medical history, travel plans, risky hobbies or medical conditions. Be as honest as possible during the underwriting period to avoid this.
- Not having listed beneficiaries can slow down the process of collecting your death benefit. Be sure to designate both primary and contingent life insurance beneficiaries to ensure your benefits don’t go to probate and end up where you intended them to.
What types of deaths does life insurance not cover?
Life insurance generally covers deaths due to illness, accidents, murder or natural causes. In some cases, however, coverage may be denied. Common life insurance exclusions are:
- Suicide (during your contestability period)
- Murder (by beneficiary)
- Death while engaged in risky hobbies/activities such as scuba diving, BASE jumping, auto racing or rock climbing
- Death due to natural disaster
- Death while committing a crime
- Death during high-risk jobs, such as logging, offshore fishing and underground mining
Life insurance policies typically cover suicide so long as it does not occur during the first two years of the policy. If suicide happens outside of this contestability period, it will usually be covered. This suicide clause is in place to ensure that applicants don’t take their lives immediately after the policy goes in force.
Your life insurance claim may also be denied if you’re murdered by a beneficiary. This “slayer rule” prevents a payout to anyone who committed murder or was closely related to the murder. In this case, the contingent beneficiaries will receive the death benefit.
If your death involves a high-risk behavior, it could impact the amount of your policy’s payout or even whether it’s approved entirely. Private pilots, for example, often have to add a rider to their policies that exclude death in a flying accident from coverage. Habitual scuba divers or bungee jumpers will likely be denied benefits if their death happens while engaged in those behaviors.
Don’t forget: if you chose not to mention those hobbies on your application, it could end up jeopardizing your coverage and your beneficiary’s ability to collect the payout. Always be honest and upfront about your favorite activities, even if it raises your premiums or creates policy exclusions.
Does life insurance cover accidental death?
Most life insurance policies do provide an accidental death benefit, including drug overdose, poisoning, drowning and motor vehicle accidents. If your death occurs as a result of one of these tragedies, your beneficiary should receive the death benefit.
Understand your life insurance policy limitations with SelectQuote.
Before you buy any life insurance coverage, it’s important to know exactly what is and isn’t covered. At SelectQuote, we’ll help you carefully review your life insurance application and assist you in answering all questions about your health, habits and work honestly. This transparency can be the difference between financial security for your loved ones or a denial of coverage.
If you have questions about whether something may be covered by a life insurance policy, whether it’s a risky activity or accidental death, our team can compare policies from some of the most trusted insurance companies in the nation to help find life insurance coverage that works for you.