Life Insurances Reviews & Info

Life insurance has very limited exclusions in comparison to other types of policies. But, like just about every contract does have some limitations. Some of the exclusions and limitations follow.

Life insurance is governed by state laws which are slightly different in the different states. For this reason you may find different exclusions in your area than you will see in this article.

What Does Life Insurance Not Cover?

Life insurance will not pay when the death occurs from suicide in the first two years of the policy’s purchase. This protects both the insurance companies and society in general.

An insured would have an extra motivation to commit suicide if they knew that their loved ones would benefit financially. This limitation removes that motivation at least for the first 2 years after purchasing the policy.

It also reduces a potential murder’s motivation for staging a suicide. There have been many cases where insurance was a motivation for murder. This at least reduces this temptation for a period of time.

Insurance policies will not pay if there was a material misrepresentation on the application. This means that if a person said that they never had a heart attack, but did the insurance company will not pay if that person dies during the contestability period. This also means that if the only thing applicant forgot to list was a doctor visit for the flu, the policy will pay per the contract.

Both are misrepresentations, but the latter isn’t material. This is because the insurance company would have still offered the applicant a policy if they know about the visit for the flu.

The first 2 years after a person purchases a policy is referred to as the contestability period. An insurance company has the right to withhold payment for cause if the person dies during that period.

The contestability clause isn’t invoked very often. This is for several reasons. Applicants are usually truthful on their applications. Insurance companies are able to verify much of the information before they issue a policy. Most people don’t die in the first 2 years.

Modified benefit policies will not pay a full death benefit if the insured dies within the first couple of years. This period is spelled out in the contract. These policies are designed for those who have significant medical conditions and who would not qualify for more robust coverage.