Life insurance companies generally want to minimize the premature payment of a life insurance policy to beneficiaries, which means many may limit their coverage exclusively to natural deaths. Natural deaths can include critical illnesses like heart attacks or cancer as well as complications from chronic illnesses such as high blood pressure or diabetes.
Alternatively, some policy issuers may cover accidental and otherwise unnatural deaths caused by dangerous activities, but it is important to verify details with the insurance company.
Examples of Instances Life Insurance Companies May Not Pay
Below are a few instances when a company may hesitate or flat out refuse to pay a benefit in the case of your death or a loved one’s death. These are important to know prior to signing on for a benefit to make sure the policy you choose works in conjunction with your needs, not against them.
Thrilling (Risky) Activities
While most Americans have a hobby they enjoy, some tend to up the stakes with particularly demanding and, in the eyes of insurance companies, dangerous activities. Even if the activity itself isn’t inherently more risky than other daily activities, such as driving a car or working around heavy machinery, life insurance companies have the capacity to be particularly selective when it comes to their clients.
Participating in things like rock climbing, scuba diving, recreational flying, racecar driving, stunt jobs and similar can all impact the likelihood of payment if death occurs during one of these activities. If your line of work specifically revolves around one of these activities, it is important to shop exclusively for life insurance products that cover the activity.
Some insurers may be more likely to approve a term life insurance plan over a whole life insurance plan in cases of increased risk, or they may offer a pricier plan specifically for high-risk occupations.
Unfortunately, suicide coverage by a life insurance policy is variable and not a universal option. When it is covered, the policy is usually limited to a certain time frame, beginning years or months after the policy’s start date. The general reasoning behind this clause is to prevent policy owners from taking out a policy with the intent of taking their own lives.
Things enter a grey area if the cause of death cannot be definitively ruled as a suicide and may result in no policy being paid out anyway. For example, in the case of an overdose, insurers may be able to deny a policy payment if it cannot be proved that the overdose was intentional or not.
Targeted killing is generally covered under a life insurance policy.
However, there is a major “but.” If the murderer is determined to be a beneficiary of the policy or connected to the beneficiary in any way, the policy will be rendered ineffective. This is to prevent murdering someone in order to benefit from the policy payout.
Also, going back to the risky activity caveat, any murder that happened while participating in illegal activity may not be covered under the policy.
How to Ensure Payouts in Case of Unnatural Deaths
It’s important to check with any potential insurer to understand their specific policies before making a commitment. If your lifestyle includes inherent risks that the everyday person does not experience, be sure to disclose that information to the insurer when applying or shop around by asking questions before applying to an insurer.