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What does life insurance not cover

We’ve heard from skeptics who think insurers will find a way to avoid paying a claim.  So what does life insurance not cover?  Let’s talk about it.

Insurance companies have a bad rap. We think most of this stereotype comes from the health insurance sector. After all, how many times have you gotten a cavity filled or picked up a prescription only to find out that your insurance won’t cover all of it? Because of these experiences, you may believe that life insurance companies operate the same way.

But here’s why you don’t need to be skeptical about life insurance:

Life insurance protects your family against the risk of your death, and unless you’re an extremely skilled con artist, your death would be pretty difficult to fake. Life insurance companies would have a hard time fighting you on the legitimacy of your claim.

However, in the spirit of being completely transparent, we want to give you all the facts.

What life insurance won’t cover: when you lie on your application

Life insurance policies come with something known as a contestability period. This means that if your insurer finds out that you misrepresented your health or risk of death by denying medical conditions or failing to include information about risk hobbies (that yearly mountain climbing trip up north!) in your application or during the underwriting process, your claim could be denied. (You can’t blame insurance companies for wanting to cover their butts.)

For this reason, we recommend being as accurate as possible when completing your life insurance application. If you’re an occasional smoker, tell your insurance company. You’re much better off paying the higher premium and knowing your family will be covered rather than lying your way to a lower premium and running the risk that your family will lose their protection altogether.

One more thing life insurance won’t cover: suicide (in the first two years)

Suicide isn’t fun to talk about, but it’s important to understand the implications of it when you buy life insurance. With suicide, there’s a risk of anti-selection. For example, someone may buy life insurance right before taking their own life to give their family a “payoff” after their death. Because of this risk, insurance companies usually exclude death benefit claims if the policyholder dies by suicide within the first two years of the policy.

Otherwise, life insurance has your back.

Beyond the two very specific circumstances we just discussed, you can sleep peacefully knowing that your life insurance company will protect you and your family. After all, life insurance companies have been in the business of offering protection for hundreds of years. If they were in the business of scamming people into thinking they were protected, someone would have gotten to the bottom of it by now.

So here’s the takeaway: Tell your insurance company everything. It’s the best way to make sure there aren’t any holes in your family’s financial safety net.

Curious what life insurance DOES cover?  Find out here.

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