What kinds of deaths are not covered by term life insurance?

Life insurance secures the financial security of your family after you die — but under certain circumstances, your policy might not pay out.

Rebecca Shoenthal author photoNupur Gambhir

Rebecca Shoenthal & Nupur Gambhir

Published July 7, 2020

KEY TAKEAWAYS

  • If you lie on your life insurance application, then your insurance company can refuse to pay your beneficiaries when you die

  • Suicide is usually covered by life insurance, but only after the contestability period (typically two years) has passed

  • Death from natural causes, like cancer and illness, or accidents are covered by life insurance

Life insurance provides vital financial protection to your loved ones if you die. But how you die matters when it comes to your coverage.

Term life insurance is an affordable type of life insurance that lasts for a specific number of years (the term) before it expires. If you die during the term, your life insurance company pays out a death benefit to your designated beneficiary.

But there are cases, such as lying on your application or having a specific exclusion on your policy, that could prevent a payout. Read on to learn more about the unique situations in which term life insurance won’t pay out the death benefit to your beneficiaries—and how you can make sure your loved ones receive the full coverage you paid for.

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Reasons life insurance won't pay out

If you pay your premium on time and die while your policy is in force, then your life insurance beneficiary will receive a payout. It really is that simple. But, there are some exceptional situations when the life insurance company may withhold a death benefit:

Lying

If you commit life insurance fraud on your insurance application about risky hobbies, medical conditions, travel plans, family health history or anything else, your insurance company can refuse to pay out the life insurance death benefit to your beneficiaries when you die. Make sure you’re as honest and thorough as possible during the application and underwriting process so there are no surprises later.

Risky hobbies

If you die participating in a dangerous activity you regularly enjoy (think: flying a private plane, bungee jumping or scuba diving), whether or not your insurer pays out depends on your individual circumstance and policy. More often than not your beneficiaries will still get the life insurance payout, but if your lifestyle poses enough of a risk, your insurer may add an exclusion to your policy prohibiting payment distribution if you die doing said risky activity.

Some pilots, for example, have to opt-in for an aviation exclusion rider to get life insurance coverage. If they die in a flying accident, their beneficiaries won’t get the death benefit.

And if you didn’t inform your insurance company about your favorite pastimes during the application process, they can refuse to pay your beneficiaries when you die or cancel your coverage altogether. Even if you end up paying extra in the form of higher premiums or exclusions on your policy, it’s important to be completely honest on your life insurance application. Not doing so can jeopardize your beneficiary’s ability to collect the death benefit.

Murder

If your beneficiary murders you, then (logically) your murderer won’t get the death benefit. This is all thanks to something called “the slayer rule,” which prevents a death benefit payout to anyone who murdered or is closely tied to the murder of the insured. In such a situation, your insurance company can instead distribute your death benefit to your contingent beneficiaries.

Suicide

Suicide is typically covered by life insurance, with one major caveat: most life insurance policies have a “suicide clause,” during the first two years of the policy (a.k.a. the contestability period we mentioned earlier). If your death is the result of a self-inflicted injury within this period (and only within this period), the insurer can refuse to pay out the death benefit to your beneficiaries.

Suicide clauses are in place so that applicants cannot take their own lives immediately after their life insurance policy goes in force so their loved ones can get the death benefit. This gets complicated in certain scenarios, such as a drug overdose. Your insurer will need to prove that the overdose was deliberate in order to refuse the death benefit pay out.

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What happens to a life insurance policy with no beneficiary?

If you don’t choose any primary or contingent beneficiaries:

If you don’t list any beneficiaries in your policy, the benefit goes to your estate. Choosing the right life insurance beneficiaries is important, and simply not naming any won’t make it easier for your children or other dependents to receive payments.

This is a common misconception, but not selecting beneficiaries can significantly slow down the disbursement of life insurance benefits because the payout is then subject to probate (when the courts determine who should get your assets). Your eventual beneficiaries may also have to pay estate taxes on the life insurance benefit if it goes to your estate.

If your beneficiaries predecease you:

If your beneficiaries die before you, the same cogs will apply as if you didn’t select beneficiaries at all — your life insurance benefit will be paid out to your estate and your intended loved ones won’t receive any death benefit.

You can make sure that your loved ones are financially protected by updating your policy’s beneficiaries with every big life event — such as a death in the family or having a child.

When won’t the insurer pay out to your beneficiary?

Any living person or active entity you list as your beneficiary is eligible to receive life insurance if you die for any reason not excluded above. This includes people who are incarcerated, people who are unemployed, nonprofit organizations and charities. As long as your beneficiaries have a bank routing number or mailing address to receive paper checks (so, no pets, sorry), you can rest assured they will be taken care of when you’re gone.

To ensure your beneficiaries don’t face unforeseen difficulties when claiming their payout, include as much information about them as possible when you first name them as beneficiary, including their social security number, full name, relationship to you, and how the death benefit should be dispersed to them.

When does the death benefit pay out?

Life insurance policies cover almost all death scenarios due to an illness, accident or natural causes. As long as you avoid the exceptional situations we detailed above, your beneficiaries will be financially secure when you die. Here’s an overview of the types of death covered by life insurance:

Natural causes

Your beneficiaries will receive the death benefit if you die of a heart attack, infection, kidney failure, stroke, old age, cancer or of any other natural cause.

Accidental death

If you die from accidental drug overdose, motor vehicle accidents, poisoning, drowning or any other tragedy, your beneficiaries will receive the death benefit.

Suicide, if it happens outside the contestability period

If the two year contestability period has passed (or, your policy’s suicide clause is no longer relevant) and you die from suicide, your life insurance policy will pay out full death benefits to your beneficiaries.

Murder

If you are murdered (and your beneficiaries weren’t involved), the death benefit will be paid out to them. The same is true regardless of how you were killed and if your death is ruled a manslaughter or homicide.

Pandemic

If you already have an active policy in place and die of a pandemic illness such as coronavirus, it’s categorized as a natural cause. Your family would still receive the death benefit, even if you had knowingly traveled to areas with a known disease outbreak. However, if you get a new life insurance policy during an ongoing pandemic and lie on your application about previous or future travel plans or any exposure to the pandemic illness, then your insurer can refuse to distribute a death benefit.

The bottom line: If you are honest on your application and you pay your premiums on time, you can rest assured that your beneficiaries will be covered when you die. If you have specific questions, be sure to ask your broker during the application and underwriting processes to avoid unpleasant hiccups when you’re gone.

About the authors

Insurance Expert

Rebecca Shoenthal

Insurance Expert

Rebecca Shoenthal is an insurance editor at Policygenius in New York City. Previously, she worked as a nonfiction book editor. She has a B.A. in Media and Journalism from the University of North Carolina at Chapel Hill.

Insurance Expert

Nupur Gambhir

Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius in New York City. Previously, she has worked in marketing and business development for travel and tech. She has a B.A. in Economics from Ohio State University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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