Learn about the common fine print exclusions or technicalities many insurance companies use in order to deny claims. Keep in mind that an insurance company operates a business, and limiting risks is necessary for any business to thrive.
After paying your premiums judiciously for years, you do not want any surprises by the time you or your beneficiaries file for a claim. Here are five common life insurance exclusions to watch out for and understand.
Act of War
You do not have to be in the military to become affected by the act-of-war exclusion. Let’s say you are a newsman assigned to cover a story in a war-torn part of the world. If you get killed or injured in a crossfire generated by that war, claims can still be denied or reduced if your life insurance policy contains this clause. Make sure you remedy this part if you think it may apply to your situation and line of work.
Any claims for death or injury resulting from the policy holder’s involvement in illegal activity can be denied by the insurance company
This clause may seem clear-cut and should not be a cause for concern for law-abiding citizens. However, it can also apply to, say, suffering cardiac arrest while trekking in a privately owned land, which is a case of trespassing. The insurance claim can be denied in this case.
The insurance company has a two-year period to cancel coverage on policy holders who may have misstated or failed to disclose information.
Always provide accurate and complete information when applying for life insurance. Your medical records may be inspected when you or your beneficiaries make claims, so lying or withholding health information can definitely work against you. A slight misstatement of your age, for instance, can nullify your claim, even if the age misstatement resulted in your paying of higher premiums over a long period of time.
When the policy holder is found to have committed suicide, the beneficiaries are denied death benefits. This stipulation protects the insurance company from policy holders who insure themselves for huge sums then commit suicide later so that their beneficiaries are left with considerable amount of money.
The suicide clause can also serve as a deterrent to suicide. Knowing that no death benefits will be paid to their loved ones, policy holders are discouraged by the suicide exception from taking their own lives.
Aviation exclusion is a clause typically found in accidental death insurance (also known as double indemnity) and life insurance policies. The aviation exclusion clause in a life insurance policy means that death benefits are not paid to beneficiaries if the policy holder dies in a private plane crash. But death resulting from the crash of a commercial airline is covered.
Life insurance exceptions differ according to the state and the insurer. Be sure to read the fine print thoroughly. If you find details and wordage that you do not completely understand, ask your insurance agent. If there are clauses you need to modify or remove, then say so. And do all these before you sign anything.