How does the average life insurance company protect itself? By writing policies that protect them from the following five common dangers:
All life insurance policies have a suicide clause that protects the company from individuals intentionally seeking to commit suicide and pass on a death benefit. Two years from the date of issuance is the normal period for such clauses.
Anyone who dies because of an act of war, be he a soldier or a non-combatant, will not be covered by most life insurance policies. It makes sense that an insurance company would seek to protect itself against war related deaths for which it simply could not afford to pay.
So, too, those who engage in hazardous pastimes such as acrobatic flying or bungee jumping: proceeds of policies may be witheld should they lose life or limb while participating in such activities.
Any insured who travels regularly to regions where disease or strife regularly claim the lives of locals and/or tourists may also find himself excluded from benefits should he fall victim during his travels. (Many insurance companies simply raise premiums for frequent visits to such regions).
All insurance policies contain incontestability periods – usually two years – during which an insurance company may choose not to pay if it believes an application was submitted that withheld information or otherwise sought to fraudulently obtain a policy. Even though the insured obtained the requisite inspection report and underwent a medical, most companies lean heavily on the applicant’s input to determine the appropriate coverage and premium. If it’s determined that full disclosure would have denied the applicant a policy (or even lowered his rating), the company is not obliged to pay.