When you purchase a life insurance policy, it’s usually with the goal of providing financial security to those you love. This coverage lets you rest easy at night, knowing that your family and assets would be protected if you were to pass away tomorrow, no matter what.
...but does it?
You may be surprised to learn that life insurance policies don’t cover every type of death. And depending on the coverage you buy today, you may unintentionally wind up leaving your loved ones vulnerable down the line.
Whether you’re shopping around for a new life insurance policy today or already have coverage, it’s important that you understand everything that your policy covers — and what it doesn’t.
Types of Death That Life Insurance Won’t Cover
There are a few important situations where your life insurance carrier could deny a claim for benefits, depending on how you died.
When it’s not covered: Whether or not a suicide death is covered by life insurance hinges on the type of policy you have and when it was purchased.
You can expect most life insurance policies to have what’s called a contestability clause. During this period — which usually lasts two years from the policy’s issue date — carriers reserve the right to investigate death benefit claims for any signs of fraud. They can also choose to deny certain causes of death during this time: namely, suicide.
If your life insurance coverage includes a two-year suicide clause, your beneficiaries will not receive the policy’s full benefit if your death is self-inflicted. Certain carriers may return the premiums that you’ve paid into the policy up to that date, but most often, your loved ones will receive nothing.
Suicide is also excluded from accidental death benefit (ADB) policies. Since this coverage is designed to protect against accidental causes of death — and suicide is intentional in nature — your loved ones will not receive the policy’s benefit.
When it’s covered: A death by suicide can be covered by life insurance, as long as the policy has been in effect for a certain period of time (usually two years) and coverage is not just accidental in nature.
When it’s not covered: If you actually read the fine print, you’ll find that most life insurance policies have exclusions for deaths that are the result of criminal activity. This means that if you are killed while, say, robbing a bank or stealing a car, your carrier is likely to deny a claim for your death.
When it’s covered: If you pass away while committing a crime, but not as a result of that crime, your carrier may still approve the claim. It really just depends on the situation and the verbiage in your contract.
When it’s not covered: It’s important that you are as open and honest as possible when applying for life insurance coverage. If you lie about certain factors — such as tobacco use or dangerous hobbies — and then pass away as a result of (or related to) those factors, your carrier could deny a claim.
For example, let’s say you tell your carrier that you have never been a smoker when filling out your application. You then pass away from lung cancer a year after your policy is issued, and your carrier finds out that you were actually a two-packs-a-day smoker for most of your life.
In this case, the carrier would likely claim fraud and use that deception as the basis for a denial of benefits.
When it’s covered: Honesty truly is the best policy, especially when your family’s financial security hangs in the balance. Always be as honest and thorough as you possibly can.
There are some instances where fraudulent information wouldn’t necessarily trigger an immediate claim denial, especially if your death was not related to the deceptive answer. However, this is really at the discretion of the life insurance carrier, and for most people, it’s really not worth the risk.
Certain Health Conditions
When it’s not covered: If you purchase accidental death benefit (ADB) coverage, rather than term or permanent life insurance, your loved ones will not be protected if you pass away from certain health conditions. Since these policies are intended to cover accidental causes of death (as the name suggests), coverage isn’t extended to natural illnesses, heart attacks, or cancer.
When it’s covered: Health and medical conditions are covered causes of death when it comes to full underwritten coverage, such as a term or whole life policy.
When it’s not covered: Again, when it comes to protecting your loved ones, honesty is key. That’s because if you lie about engaging in certain risky behaviors or participating in dangerous hobbies — and then die during one of those activities — your carrier could potentially deny your family’s claim.
For example, if you were to pass away while piloting your private plane, but just told your carrier that you don’t have a license or fly recreationally, the claim would likely be denied.
When it’s covered: In some cases, a carrier will just want to know more about your risky hobby before issuing a policy; it won’t automatically mean that you can’t buy coverage. For example, if you scuba dive occasionally, your carrier may ask whether you are a deep sea diver or cave/wreck diver; if you just recreationally dive at shallow depths, it may not affect your coverage at all.
You could pay higher premiums, depending on the factors involved, or your policy could include a clause for that specific activity.
When it comes to protecting those you love, it’s important to buy the life insurance coverage that best fits your life.
If you only want to protect against the impacts of a sudden and accidental death, ABD coverage could be an affordable option. If you want to ensure that your family is protected whether you die in a car accident or from natural causes, term or whole life coverage could be the better choice.
The biggest takeaways here, however, are to be as forthright as possible when filling out a life insurance application, and be sure to read your coverage contract fully. That way, your dependents will get the financial security they need most, if the worst were to happen.
Not sure which policy or level of coverage is right for you? LeapLife is here to help. Our platform makes it easy to get matched with A (or higher) rated insurance companies that can protect those you love most. Coverage is available for up to $5 million and with terms as long as 40 years.