Life Insurance

Cases When Your Life Insurance Company Won’t Pay

In the past, it was commonplace for life insurance companies to exclude just about anything that they found risky or even entire diseases. If you occasionally went sky diving or had the misfortune to die from AIDs, then you probably wouldn’t have been covered. Today, a lot of things have changed in the life insurance world, including the list of exclusions. Life insurers are much more likely to accept at-risk groups (though for sky-high premiums) and the list of exceptions is shorter. However, there are still some reasons why your life insurance company may not pay out in the event of your death.



In every single life insurance policy, there will be a section for the incontestability clause. This clause designates a duration of time (typically 2 years) in which the policy can be voided or premiums raised if the insurance company thinks that you lied or did not give out all information while applying.


Because of the incontestability clause, it is incredibly important that you do not lie or hide information on your application. For example, let’s say that you are a smoker but stop smoking long enough before the medical exam so the insurance company doesn’t find out about your habit. Then, a year later you get lung cancer and die. When the medical examiner report shows years worth of smoke damage in your lungs, the insurance company will know that you lied and can void your policy.


Note that misstating something on your life insurance policy is not the same as outright lying. Lying on your application can be considered insurance fraud and you can be held legally accountable for it.



Even though life insurance policies don’t have as many exclusions as before, there are still numerous reasons why they won’t pay out the policy of the insured person. The #1 life insurance policy exclusion is suicide. Some life insurance policies will still pay out in the event of suicide but only under certain circumstances, such as the suicide cannot take place within 2 years of the policy being taken out.


The next most common exclusion is “acts of war.” An act of war doesn’t have to be as a combatant in a war or even as a casualty. Acts of war can be part of undeclared wars as well. Most people taking out life insurance policies before 2001 didn’t consider the chance of war, but the aftermath of September 11th changed that, especially when people heard about how some insurance companies refused to pay many policies.

Cases When Your Life Insurance Company Won’t Pay

If you die while engaging in a hazardous activity, then the insurance company may also have the right not to pay out on your policy. Insurance policies will each define “hazardous” differently but there are some basic activities while will be excluded by virtually all policies, like skydiving or mountain climbing.


Keep in mind that insurance policies do not have a standard form like property insurance or many other types of insurance. You will really have to read into the fine print to make sure you know when you are covered and what events will exclude your coverage. This can make a big difference when you are deciding whether or not to go on that skydiving trip or think about lying about your social smoking habit.