If you are shopping for a term life insurance policy you may be curious as to what type of death is covered for term life.
For example, is your death resulting Cancer, covered by term insurance?
The answer is "Yes".
If you are the named insurance person on a term life insurance policy, and your cause of death is Cancer, the death benefit would be paid out on your life insurance.
However, all benefits paid out on a term life policy are subject to the Terms, Conditions and Exclusions stated in the Insurance Contract.
Causes of Death Covered by Term Life Insurance
The natural death or caused by health-related issues is covered by term life insurance plans. In case the policyholder dies due to any type of critical illness or medical condition, the beneficiary of the policy will get the sum assured as the death benefit.
Causes of Death Not Covered by Term Life Insurance
Death by participating in an adventure or hazardous activity is not covered by term insurance.
Most people know that term insurance will give a lump sum death benefit to the beneficiary upon the death of the insured (policyholder), within the policy term.
What Does Life Insurance Cover?
In general, if you die due to natural causes, an illness, or an accident, your designated beneficiaries will get the life insurance death benefit payout.
Here's a quick rundown of the types of deaths that are covered under life insurance policies:
Natural Causes
Life insurance covers death due to natural causes. If you die of a stroke, heart attack, old age, cancer, an infection, kidney failure, or some other natural cause, your beneficiary will receive the insurance payout from your life insurance plan.
Accidents
Your insurance policy will pay out a death benefit to your beneficiary if you die from a motor vehicle accident, accidental drug overdose, poisoning, drowning, or some other accidental tragedy.
Murder
The death benefit will be paid to your beneficiary if you are murdered—unless your beneficiary murdered you, or is closely tied to your murder.
Suicide
Life insurance covers suicide, and your beneficiary will receive the death benefit from your insurance policy unless your death occurs during the "Contestability Period”, which is typically the first two years you are insured by your policy, provided there's no other exclusion in the policy that forbids death by suicide.
Suicide is typically covered under a life insurance contract, with one major caveat: most life insurance policies have a "Suicide Clause" during the first two years of the policy (also known as, the Contestability Period).
Life insurance does not cover suicide if your death is within this period.
Insurance companies have suicide clauses in place so that applicants cannot take their own lives immediately after their life insurance policy goes "In Force".
However, this may become complicated in certain scenarios, such as a drug overdose, which results in the death of the insured person.
Life insurance companies can deny coverage in the case of a drug overdose, but they’ll need to prove that the overdose was deliberate to refuse the death benefit payout.
Pandemic illness
If you have an existing life insurance policy and you die from COVID-19, it's categorized as a natural cause, and the insurance company will pay out the death benefit to your beneficiary.
However, suppose you buy a new policy during an ongoing pandemic and lie on your application about your health or exposure to the illness.
In that case, the life insurer can and may refuse to pay out any benefits upon your death, if it results from COVID-19.
What Type of Death Is Not Covered by Term Life Insurance?
If you don't die due to one of the reasons mentioned above, your insurance carrier may not pay the death benefit to your beneficiaries.
Here are some of the situations when your beneficiaries may be unable to collect death benefits from your term life insurance policy:
High Risk Activities
Depending on the situation and your policy, you may not be covered if you die while participating in a risky activity.
Risky activities are recreational pursuits that have an increased potential for injury or death, such as:
The risky activities category also includes some jobs, such as working as a pilot, logger, underground miner, offshore oil rig worker, and offshore fisherman.
If you participate in risky activities, whether for fun or work, you can still buy a life insurance policy—but you might end up paying higher premiums.
And, depending on how risky the activity is, your life insurer may add an exclusion to the policy that prohibits death benefit payments if you die while engaged in that activity.
If you engage in any risky activities, tell your insurance company during the application process.
Otherwise, your insurer can cancel your policy or refuse to pay out the death benefit upon your death.
Murder
Under the "Slayer Rule" if your beneficiary murders you, or is somehow connected to your murder, your beneficiary will not receive the death benefit. Instead, your insurer will pay out the death benefit to your contingent beneficiary, or to your estate.
Suicide
In general, life insurance covers suicide. However, most policies have a "Suicide Clause", or Contestability Period, during the policy's first two years.
Life insurance policies won't cover a suicide that occurs during this period.
Things can get tricky if a policyholder dies of a drug overdose during this time. However, in this case, the insurer would need to prove the overdose was intentional to withhold the death benefit.
Other Reasons Life Insurance Won't Pay Out a Death Benefit
Lying on the Application for Insurance
Life insurance companies can withhold death benefits if you lie on your application (that's insurance fraud, by the way). For example, the insurer can cancel your policy, and your beneficiaries would lose out on benefits, if you lie about your:
The death benefit payout gets complicated if you don't have designated beneficiaries—or if you do and they predecease you.
In these situations, the death benefit goes to your estate and not necessarily to your loved ones.
It's essential to designate primary and contingent beneficiaries to receive the insurance death benefit in the event of your untimely death.
Otherwise, the benefits are subject to probate, and they ultimately may not end up where you intended them to go.
What Happens to Your Life Insurance If You Die?
Life insurance provides financial protection to your loved ones if you die, but policies don't pay out in every situation.
In general, life insurance policies cover deaths from natural causes and accidents.
If you lie on your application, your insurer could refuse to pay out any benefits to your beneficiaries when you die.
The Bottom Line
Life insurance can provide peace of mind and a valuable financial safety net for your loved ones.
In general, life insurance policies cover deaths due to natural causes, illness, and accidents.
Still, insurers can withhold benefits in certain situations. Be sure to read your policy's fine print to understand what's covered, and what is not covered by your policy.
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