Common Term Life Insurance Exclusions

Learn about the common term life insurance exclusions that could prevent a death claim from being paid.

Term life insurance is a particular type of life insurance that offers temporary life insurance for you and your family. This type of insurance pays a death benefit if you die within a specific term or time period. If the contract is in force when you die, a death benefit is paid. However, three main exclusions are common to term life insurance policies, which will also prevent a death claim from being paid.

Suicide

Suicide clauses are common exclusions in term life policies. Such an exclusion prevents an individual who is contemplating suicide from taking out a life insurance policy and committing the act so that the beneficiary will collect on the proceeds of the policy. It has also been argued that this provision prevents an individual from committing suicide as a means by which to lift financial burdens from himself and his family. The exclusion also may deter some individuals from profiting from the death of other depressed or suicidal family members. Instead, upon suicide, a return of the premiums paid is given to the beneficiary.

Aviation

Aviation exclusions do not allow a payment of death benefits if the insured individual dies as a result of the crash of a privately operated airplane. In other words, if the insured is a passenger on a noncommercial plane and dies in a crash, no death benefits will be paid. Normally, a return of premiums is offered to the beneficiary.

Dangerous Activity

Dangerous activities such as sky diving, auto racing and rock climbing may be excluded from your policy. This means that no payment of death benefits will be paid if you die during any of these activities. While this exclusion is becoming increasingly rare, it still exists. Instead of the death benefit, the beneficiary or beneficiaries will receive a return of the premiums paid.

References

• My Life Insured: Term Life Insurance Exclusions
• "Practicing Financial Planning for Professionals, Practitioner's 10th edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
• "Ernst & Young's Personal Financial Planning Guide, 5th Edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004