An insurance is an arrangement or agreement that provides a guarantee of compensation in-case of a specified loss.
The loss can be an illness, death or a damage.
Life insurance is a form of agreement that someone makes with the insurance company, in which the person is supposed to make payments to the insurance company, and in return a sum of money is to be paid to the person after a period of time or the money is to be paid to their families in-case they die.
Insurance companies are also in business and like all business they ensure more profit than loss hence they control the risks they insure.
Insurance companies limit their risk of loss by excluding some risks from being insured.
These exclusions of life insurances are limited by a state law.
These exclusions will be made clear in the life insurance policy you choose.
These exclusions are thereby discussed below:
- Suicide Exclusion
All life insurance policies exclude suicide among everything else they insure for.
The suicide clause states that within the first two years of the insurance coverage, the insurance company won’t have to make payments to the insured within that first two years’ coverage.
There are people that purchase that kind of life insurance with a purpose of providing financial benefits to those they leave behind who relied on them, their beneficiaries.
In-case of a suicide event within this time, the insurance company only returns the premiums paid, but they do not pay the death benefits.
- Contestable Period.
This period is more like an engagement period hence called the contestable period.
During this predetermined period, which is usually two years since the issue of the insurance, they check the truth of the information you fed them, whether or not the details were withheld or they were misrepresented.
If they find something that is not accurate and confirm it during this period, they may not pay the death benefits.
- Act of War
This life insurance exclusion is less common as compared to the 1970s.
The act of war is excluded from being insured because it means that if the cause of your death is as a result of war, then your death benefits may not be paid.
As earlier said the insurance companies are also in business.
They do not want to incur losses, and so they reduce their risk of loss.
The acts of war include both abroad and domestically.
- Aviation Exclusion.
This kind of exclusion is majorly for those with private air-crafts.
If the insured dies in a commercial flight the death benefit may be paid but the death benefits may not be paid to a death caused by their private aircraft crash.
- Intoxication Exclusion.
This kind of exclusion involves the drug abuse and alcohol exclusion.
Most insurance companies exclude payment coverage for injuries suffered while being intoxicated.
There are those taking drugs that are prescribed by a qualified doctor.
They are not within this scope that insurance companies are excluding.
However, this clause can be used by insurance companies to deduct the premiums paid.
This is so if it is stated that also the normal use of legal substance is also included in the exclusion clause.
- Illegal Activity Exclusion.
This is such a straight to the point clause.
If you die while committing an illegal activity then the death benefits will not be paid to your beneficiaries.
This exclusion goes all the way applying if, let’s say, you were walking across private property without the owner’s consent, which is clearly trespassing, then you get a heart attack and die, your claim could still be denied.
If you are in involved in a bank robbery or any kind of illegal activity your life insurance claims could still be denied.
- Dangerous activity exclusion.
Human beings have variations such that whatever seems dangerous to one person, may not seem dangerous to another.
This is why if this clause happens to be in a policy, then it makes a list of what they consider dangerous.
Examples of things considered dangerous are: skydiving, deep sea diving, race car driving.
However, when this clause appears, one will often get a chance to make additional payments or premium for a particular activity to be removed.
This actually means that if you are a race car driver and you want to be insured or covered, you can make payments for that protection.
- Misstating Age Clause.
When you misstate your age while applying for a life insurance, your policy provider may not make payments to your beneficiaries once you die.
This is all because you lied about how old you were while applying for the life insurance.
Whether you misstated the months or days or even a few years, then they just do not pay the death benefits to your dependents when you die.
- Misrepresentation of Material Clause.
This unlike the contestable period clause which lasts for only two years, lasts for an entire period of the life insurance policy.
If you were not honest enough with the details of yourself while filling in the life insurance policy and your policy holder finds out, then they can drop your policy anytime.
That is, if you withheld information so as to get approval of a certain policy.
Whether there are minor loopholes, or just small technicalities you cannot afford to not take notice of the particulars or rather you should not ignore anything from your life insurance policy.
No one ever wants to be accountable for compromising those benefits intended to be for your dependents.
Keenly read each and every word in your life insurance policy and understand before you sign the life insurance contract.
If you do not understand, it is advisable to seek clarification from experts, ask questions and ensure you comprehend everything in your contract.
Apart from that do not put yourself in situations that may compromise your life insurance because this could cost you and your beneficiaries heavily.