What's NOT Covered By Life Insurance:
Duration of Your Term Life Insurance Policy Expired
Term life insurance is the most popular type of life insurance policy.
Unlike whole life insurance, a term life death benefit is only guaranteed for a specified period of time (Policy Term), which is selected when the insurance policy was initially approved.
After the term ends, you’ll have to re-apply and get approved for a new policy if you want to continue being insured for life insurance.
It is very important to know exactly when your life insurance policy term is set to expire. This is when your life insurance coverage ends.
Even if the term ended the previous day before you passed away, the insurance carrier has no obligation to pay your family a death benefit from your expired life insurance policy.
Fraud, Lying, Material Misrepresentation
Never lie when applying for a life insurance policy. If you’re a Smoker (which includes Vaping), always disclose that on the application for coverage. The same goes for your health history including all illnesses, any high-risk employment or hobbies, past DUI’s, and any family history of mental illness, etc.
Disclosure any of the above will likely cause your monthly life insurance premiums to increase, but it’s better than the insurance company declining to pay out the death benefit on your life insurance policy when your loved ones need it most.
Death Within The Contestability Period
As long as it’s disclosed upfront, passing away due to things like a pre-existing health condition, a smoking related illness, or a high-risk activity is often still eligible for a payout of death benefits.
This is why monthly premiums are often more expensive after these risks are acknowledged, to account for the higher likelihood of death resulting from them.
Make sure to discuss all insurance policy terms, conditions and exclusions with your agent, to ensure everything is properly covered to avoid any surprises for your loved ones after your passing.
Lapsed Premium Payment
If you do not pay your insurance premiums on time, a payout of the death benefit from your life insurance policy can be denied.
However, most life insurance policies come with a Grace Period, but never assume this is the case.
A Grace Period is an extended period of time you are allowed to pay your premiums and maintain your insurance coverage.
The life insurance "Grace Period" is the time following the premium due date that the policyholder has to pay the premium without negative consequences.
Generally, the grace period will be 30 or 31 days following the premium due date, but this is specified in the insurance policy documents for each life insurance policy.
It can be easy to put this payment on the backburner as a non-essential bill due at the end of the month, but if your family’s financial situation is already tight, meaning you really need to stick to your family’s monthly budget, imagine how much worse it might become if they lost you, the main income earner for the family, and then found out your life insurance policy death benefit was denied?
Act of War or Death in a Restricted Country
Death benefits are often denied if the policyholder passed away while engaged in an act of war. This is one of the standard exclusions on most life insurance policies.
In addition, if you die while abroad, especially to countries deemed dangerous, your policy may be considered invalid. It’s a good idea to check with your insurance agent before traveling to high risk countries, if you question whether your death while in that country would be covered by your life insurance policy.
Be sure to check your individual insurance policy to understand exactly how these restrictions on coverage may or may not apply to your situation.
Suicide (Within First 1-2 Years of Coverage)
Many insurance policies have what’s commonly called a Suicide Clause excluding coverage for death resulting from a suicide of the insured person.
The suicide clause was created to keep people from taking out a large life insurance policy with the intention of ending their life so their family can receive a large payout.
Beneficiaries of policyholders that die by suicide, usually within the first two years of taking out a policy, won’t receive a payout of any death benefits due to the Suicide Exclusion.
However, depending on the state in which you live, the suicide exclusion may only be for one year after starting your life insurance policy.
Denial of a death benefit from life insurance due to suicide may also occur if the deceased insured person did not disclose a known history of depression and/or mental illness when initially applying for the insurance policy.
High-Risk and Illegal Activities
If the insurance policyholder dies due to participating in a high-risk lifestyle or activity like skydiving, bungee jumping, rock climbing, etc. your beneficiaries may not be eligible for a death benefit.
If you do disclose your passion for these activities when applying for a policy, it’s still possible to get covered for death resulting from these activities, but you will pay a higher premium to account for that increased risk of death.
In addition, activities like an alcohol or drug overdose due to drug use not prescribed by a doctor, death while engaging in an illegal activity, death while driving drunk, etc. may also be excluded from coverage.
Basically, any activity where you knowingly put yourself in harm’s way could possibly deprive your family of a death benefit payout from your life insurance policy.
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What Types of Death are Not Covered by Life Insurance?
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