Life insurance is a nice way to ensure your loved ones are taken care of after you die, but there are some causes of death that insurance companies won’t pay a death benefit for. These exclusions can be found on most life insurance quotes.
Knowing what they are could help you make better life choices to ensure the financial security of those who depend on you. Continue reading to find out what causes of death are not covered by most life insurance policies.
Why life insurance companies may deny a death benefit
Life insurance companies calculate their premiums and determine death benefit eligibility by assessing risk and policyholder behavior. Risk is calculated using complex algorithms and actuarial tables. Behavioral analysis is more straightforward. Voluntary acts that put you in harm’s way, resulting in your death, could void your life insurance policy.
Here are some examples:
- Suicide: Your family will not get a death benefit if you die by suicide. If you’re having suicidal thoughts, please seek professional help or reach out to a friend or family member.
- Criminal activity: Illegal activity does not disqualify you from a death benefit. Losing your life while committing a crime is the reason insurance companies will deny the claim. That includes car accidents in the getaway vehicle. This is not considered an accidental death, so your family won’t collect the death benefit.
- Pre-existing medical conditions: Some life insurance policies don’t require a medical examination. That makes it tough to tell whether someone has a pre-existing condition. The cause of death might be an indicator. A good example of this is not disclosing diabetes on your life insurance application. If it contributes to your demise, the life insurance company might not pay out the death benefit.
- Drug or alcohol abuse: The Center for Disease Control (CDC) reported 108,000 drug overdoses in the US in 2022. Alcohol-related deaths numbered 95,000 for the year. Life insurance companies will not pay out death benefits when the cause of death is related to drug or alcohol abuse.
- Acts of war: Professional soldiers have benefit packages that pay out to their families if they lose their lives. Civilians who commit acts of violence do not have the same luxury. Life insurance policies have an “acts of war” clause excluding loss of life due to an active part in an invasion, insurrection, revolution, military coup, or terrorist activity.
- Risky activities: Skydiving and bungee jumping offer a huge adrenaline rush. Make sure your affairs are in order before you attempt them. That includes your finances. Life insurance companies won’t pay for a malfunctioning chute or a fatal fall.
The Bottom Line
A life insurance death benefit can minimize the financial impact that your death could have on your loved ones. That benefit will not be paid if you commit suicide, die while committing a crime, have some pre-existing medical conditions, overdose on drugs or alcohol, lose your life in an act of war, or meet your end doing a risky activity like skydiving or bungy jumping.
It’s important to research your benefits and read the fine print on your policy before signing up and paying premiums. Know what’s covered and what’s not covered. That’s the only way you can be assured that your loved ones will be cared for in the event of your death.
Sources:
https://www.investopedia.com/which-types-of-deaths-are-not-covered-by-life-insurance-5094285
