Exclusions that can Lead to Denied Life Insurance Claims
Life insurance policies usually pay the proceeds to a beneficiary or beneficiaries when the policyholder dies. It’s a simple way to provide a lump sum of money to the decedent’s family and the process should go smoothly. There are exceptions in most life insurance policies, however, that could lead to denied life insurance claims. Understanding what these exclusions are is crucial when shopping for life insurance.
In the past, some companies would never pay out the proceeds of a life insurance policy if the covered individual committed suicide. Today, most companies offer policies that deny claims filed less than two years after the policy’s effective date. This is supposed to prevent people who are depressed from buying a policy to get money for their families, then immediately killing themselves. It’s a grim exclusion, but common in most policies.
Disappearance with No Body
If the insured disappears and is gone for a prolonged period of time, you may be able to have them declared dead, but it requires some effort and involves a court finding. Because a death certificate has to be submitted when filing for disbursement of a life insurance policy, you can’t simply tell the insurance company that someone is gone, and you know they are dead. You’ll need to gather evidence, get a police report and possibly go to court to have the individual officially declared “missing, presumed dead.” Denied insurance claims are common when someone disappears, so hiring a life insurance attorney is the first step you should take. They can take the steps needed for you to have someone declared dead, forcing the insurer to pay the proceeds.
This is an exclusion that varies from insurer to insurer, depending on their definition of a dangerous activity. Be sure you ask what is considered dangerous enough to void the insurance payment before you purchase a policy. Common activities that may not be covered include hang gliding, rock climbing, auto racing, etc. Some insurance companies will cover these activities, but only if you pay a significantly higher premium for the policy. Ask now so your family isn’t excluded later.
The aviation exclusion doesn’t mean you can never fly anywhere. Air travel has become too commonplace; denied life insurance claims are unheard for commercial air travel. Private aviation is different because it is much riskier and has a higher fatality rate. If you travel by private jet or are the pilot of your own small airplane, you will either need to pay a higher premium or forego any coverage if you are killed in a private plane crash.
If you fall off your roof while cleaning your gutters, you’ll be covered by most life insurance policies. If you fall off your neighbor’s roof while committing burglary, you’re probably not covered. Doing anything illegal is inherently more dangerous than daily living and most insurance companies treat it that way. So sorry, but you need to be an honest citizen.
Acts of War
Denied insurance claims stemming from acts of war include not only being attacked during actual combat, but invasions, revolutions, insurrections and government coups. Since 9/11, most insurance companies have paid the proceeds to family members if someone has been killed in a terrorist attack on U.S. soil. If an all-out war takes place on U.S. soil, however, policies would not be paid in most cases simply because during war, so many people die.
Another consideration is where an act of war or terrorist attack takes place. Check with your insurance provider if you plan on travelling outside the country. They can provide a list of countries they consider too dangerous to visit because they are embroiled in war. If you die in another country’s war, your life insurance policy will probably not pay any proceeds to your family.
With so many possible exclusions, it’s more important than ever to talk to an attorney versed in life insurance coverages and exclusions so your family isn’t shocked be a denied life insurance claim when they’re already reeling from your death.