General Exclusions of Life Insurance

A policy provision which eliminates coverage for some types of situations are called exclusions. The scope of coverage in an insurance agreement is narrowed by exclusions. Insurance companies apply exclusions in their insurance agreement to carve out coverage for the risks which they are not able or unwilling to insure. There are various purposes of putting exclusions. Most apply to covering risks that fall in one of the categories mentioned below:

Man Made Disasters

These risks cannot be insured as they are expected to affect a lot of policyholders at one time. For example, a war or a riot.

Illegitimate / Unlawful Activities

Insurance policies exclude the risks that are done intentionally and violate the law i.e. criminal acts. By taking such risks, one is deliberately getting into situation which may harm the persons involved. Whereas insurance covers risks which are accidental and unexpected.

Life style related risks

Insurance companies do a check on your life style related habits. Before issuing a life insurance policy the company asks the policy holder about their smoking habit. The piece of information comes handy as it is a harmful habit which can cause death of the policy holder. Insurance companies believe the chances of smokers making a claim are more likely than non-smokers hence the premium for smokers is higher than a nonsmoker. If the policy holder fails to mention or lies about the smoking habit and passes away, the insurance company can deny the claim if they come to know that the death was due to smoking related disease. Same is the case with drinking habit, the policy holder needs to inform about drinking habit so the insurance company can evaluate the risk and accordingly decide on the premium payable.

Suicide and self-inflicted injury

Suicide makes in to every term plan’s exclusion list. The insurance claim money and benefits won’t be paid if the policy holder commits suicide within one year of the policy commencement. Some insurers may pay back a particular percentage of premiums paid by the policy holder after deducting the administrative and medical expenses or any policy related expenses. Suicide exclusions clause is also valid to group insurance plans.

Adventure sports

As mentioned above insurance covers risks for situations which are accidental and the policy holder otherwise takes all precautions to evade those risks. Adventure sports activities like rock climbing, auto racing, bungee jumping, sky diving etc. are not covered as the policy holder is aware of the risks and is getting into the act on will. Although some companies have now started to cover adventure sports only if the policy holder agrees to pay a higher premium for the extra coverage. Air plane accident exclusion Insurance companies cover for life insurance policy is limited only to accident that has happened in a commercial airline as a fare paying passenger or a licensed passenger-carrying commercial aircraft operating on a regular scheduled route. It excludes engaging in aerial flights (including parachuting and skydiving).

HIV or sexually transmitted diseases

If the policy holder dies of HIV or any sexually transmitted disease then the claim may be rejected under the terms and conditions and no payout will be made.

Waiting period

Life insurance policies have a waiting period before benefits for critical illnesses become payable. Generally, 3 months waiting period is applicable from the issue of the policy or for any revival.

Illegal drugs or abuse of medicine dosage

If the policy holder’s death is due to consumption or use of intoxicating drugs/alcohol/solvent or abuse of medicine dosage other than the prescribed limit by a registered doctor it will lead to rejection of life insurance claim. In such a case the dependents or the nominee will not be paid any money by the life insurance company.

This chart encapsulates the general exclusions in a life insurance policy

Conclusion:

When purchasing a life insurance policy, it is extremely important to know the exclusions and read the fine print of terms and conditions. Having done the hard work of paying the premium, the last thing you want is your loved ones having to undergo claim denial and facing financial crises. It may be a bit tedious and boring to read the policy terms. But by being aware of the exclusions at least you will be at peace and would know the actual worth of your policy and its coverage.