A life insurance policy pays out a lump sum of money to your beneficiaries when you die for nearly any cause of death, including natural causes, accidents, and even suicide. But certain rare causes are not covered — if there’s fraud or an illegal activity involved, or when the kind of death is included in a known policy exclusion.
When will a life insurance policy not pay out?
As long as your insurance policy is active and you’ve kept up with your payments, when you die the insurance company will pay out the death benefit to your beneficiary. But there are some situations when the insurer may withhold a death benefit.
If you lied on your application or commit insurance fraud
If you die while practicing a risky habit or activity excluded from your policy
If you are murdered by the policy’s beneficiary
If you commit suicide within the suicide clause period
In rare cases of act of war or terrorism
If you die by overdose within the contestability period
If you die while participating in an illegal activity
If you leave no beneficiaries on your policy
Lying or committing fraud
If you aren’t transparent about risky activities, health conditions, travel plans, or your family health history when applying for coverage, the insurer can refuse to pay the death benefit to your beneficiaries.
Withholding relevant information on your application can be considered life insurance fraud.
Being honest and thorough when you apply is the best way to ensure that there won’t be issues with the payout of your policy.
If the activity poses enough of a risk, your insurer may add an exclusion to your policy that prohibits payment if you die participating in such activity.
Private pilots, for example, may need to have an aviation exclusion rider to get life insurance coverage. If they die in a flying accident, their beneficiaries won’t get the death benefit.
If there are any exclusion riders on your policy, this is something you’ll know before the policy goes into effect. Your loved ones won’t have to worry about it after you’re gone.
If the beneficiary of a policy murders the insured, they won’t get the death benefit due to the slayer rule. The slayer rule prevents a payout to anyone who commits murder — or is closely tied to the murder — of the person insured.
If this happens to you, your insurance policy won’t be lost. Instead, the insurance company will pay the death benefit to your contingent beneficiaries — also known as secondary beneficiaries — or your estate.
Suicide is usually covered under life insurance, with one caveat — life policies have a suicide clause that prohibits a payout for death by suicide in the first two or three years of the policy, depending on the company.
Insurers have suicide clauses in place to prevent applicants from taking their own lives immediately after their life policy goes into effect. The time frame for suicide clauses can vary from insurer to insurer, but it’s usually two to three years.
If you or someone you know is in crisis, you can reach the National Suicide Prevention Lifeline by calling or texting 988. The service is free and available 24 hours a day, seven days a week. The deaf and hard of hearing can contact the Lifeline via TTY by using your preferred relay service or dialing 711 then 988. All calls are confidential
Acts of war or terrorism
While this scenario is rare, if you die in an act of war or terror, some insurers might refuse to pay out your policy’s death benefit.
This type of inclusion is less common in life insurance than in other types of insurance. The good news is that many of Policygenius’ partner companies don’t include this inclusion in their policies.
The situation is slightly more complicated if you’re an active member of the military. Whether you qualify for a private life insurance policy will depend on your rank and your current deployment status. Ask your insurance agent for clarification if you have questions about this exclusion.
Drug or alcohol use
Death by drug or alcohol use is usually covered by a life insurance policy. However, if a death caused by drugs or alcohol occurs within the two-year contestability period, it could jeopardize the payout of the death benefit.
During the contestability period, the insurer has the right to review your application materials for any inaccuracies. If it finds out that you lied or withheld information about any history of drug or alcohol abuse when you applied for coverage, it might deny the claim and your beneficiaries might not receive the death benefit.
Life insurance companies can also be exempt from providing coverage in the case of suicide by drug overdose, but they’ll need to prove that the overdose was deliberate to deny the death benefit.
Some life insurance policies have an exclusion for deaths that occur while the insured is participating in an illegal activity.
This exclusion may apply to some crimes — felonies, for example — but not others. The contestability clause may come into play here as well — if the death occurs after the policy has been active for two years, the death benefit may get paid out regardless.
Every insurer has its own guidelines on how to deal with illegal activities. Your agent will be able to walk you through any exclusions included in your policy.
If you leave no beneficiaries on your policy
Paying out the death benefit can also get complicated if you don’t list any beneficiaries in your life insurance policy, or if your beneficiaries die before you do.
Without any beneficiaries, the money from your policy’s death benefit is paid out to your estate and has to go through probate court — a long process where a court decides who should get your assets. It could take up to a year for any funds on your estate to be paid out.
The same scenario applies if your beneficiaries die before you — the death benefit will be paid to your estate and a probate court will ultimately decide who gets your policy’s payout.
The easiest way to make sure your family will receive the payout when you die is by keeping the beneficiaries on your policy up to date and naming secondary beneficiaries, who will receive the death benefit if your primary beneficiary can’t.
What does life insurance cover?
Life insurance policies cover deaths due to illness, accidents, or natural causes. As long as you avoid the exceptions detailed above, your beneficiaries will get the payout when you die. That includes:
Accidental death: Accidental drug overdose, motor vehicle accident, poisoning, drowning, or any other tragedy
Pandemic-related illness: The coronavirus, for example, is categorized as a natural cause of death
Suicide after two years: As long as the period covered by the suicide clause has elapsed
Murder: As long your beneficiaries weren’t involved, regardless of how you were killed and if your death is ruled manslaughter or homicide
If your insurance policy has any exclusions, they’ll be clearly communicated to you before the coverage becomes active. Exclusions aren’t meant to withhold the death benefit from your family, but to protect the insurance company from fraud.
If you’re honest on your application and pay your premiums on time, your beneficiaries will be covered when you die. If you have specific questions, reach out to a Policygenius agent for free to learn more about deaths covered by life insurance.