Are you considering purchasing life insurance as part of your financial planning, but have questions about what it will and won’t cover? There are certain activities, events, illnesses or situations that may not be covered by your policy. In this article we’ll break down the top 8 things your life insurance typically won’t cover – and why. Read on to find out more!
1. Concealing information on your application
When submitting your insurance application, be sure to read all questions carefully and answer truthfully. Remember that lying or omitting relevant information related to health and lifestyle can not only bring down the premium rate; it could also result in a total nullification of the policy if you ever need to make a claim.
Of course, disclosing any potentially dangerous activities such as skydiving is essential – otherwise, should an untimely death occur while engaging in said activity, then the insurer reserve the right to reject compensation. Fraudulence or non-disclosure are usually cited as primary reasons why most payouts never reach finalization.
2. If for some reason you commit suicide.
Most life insurance policies will not provide any monetary compensation if the policyholder commits suicide within their first 12 to 24 months of coverage. This is done as a safeguard, so people are discouraged from obtaining high-value policies and then intentionally taking their own lives in order to absolve their loved ones from debt.
Although claims could still be denied afterwards on grounds of non-disclosed mental health issues, insurers may nonetheless agree to cover losses beyond the initial year’s term.
3. If you suffer from any kind of terminal illness.
Terminal illness is usually characterized as a severely progressing ailment where the expectation of survival is less than one year, or an incurable affliction. Numerous insurance companies will grant a payment in the form of a lump sum; however this amount may differ according to how much time remains on your policy.
Nevertheless, if you become terminally ill within 12 months from when your plan ends, insurers are not obligated to make any sort of advanced payment – only once death has occurred.
4. If you don’t inform your insurer about your new health issues.
It is essential to inform your insurance company whenever life adjustments occur, such as getting hitched, providing birth to a child, relocating and/or changing profession. In the event that you move home and have an increased mortgage payment or change jobs with higher income earnings, it is probable that altering or enhancing the extent of cover will be necessary.
Failing to update policy terms or switch to a more advantageous plan could result in being underinsured; furthermore, if diagnosed with a fatal illness but not informing your provider priorly may cause your claim’s denial.
5. If you move or travel to a foreign country.
Insurers tend to take a dim view of policyholders who are away from the countries comprising the EU, Canada, Australia, New Zealand, the USA, the Isle of Man or Channel Islands for in excess of twelve months. Consequently, one’s life insurance may be rendered ineffective if residing abroad or visiting predetermined geographical areas over an extended period.
6. You have outlived your policy.
One of the most common reasons why a life insurance policy may not pay out is because you have outlived your policy term.
When purchasing life insurance, you choose how long the policy remains in effect – this is known as the ‘term’. If you outlive the term on your plan (for example, if a 10-year policy reaches its 11th anniversary), then unfortunately any death benefit will no longer be payable. This means that if anything were to happen to you after this point, your family would not receive any money from the insurer to help them through their time of need.
The good news is that many insurers offer renewable and convertible options which allow you to extend or modify your existing coverage without having to go through another medical examination or experience rating period.
7. You have missed your premiums
Missing out on premiums is a critical aspect in the ability of a life insurance policy to pay out. Upon taking out life insurance, it is accepted that consistent payments occur in order for the policy to remain valid and effective.
These installments promise security and assurance for your family should they ever need to use the policy – however, if payments are not kept up with, then this could result in disqualification of the plan and make it unfeasible for payout upon request. It is absolutely essential to maintain consistency with premium fees once acquiring life insurance so as not to find yourself without coverage when you may need it most.
8. Insufficient documentation submitted after your death
Insufficient documentation is one of the main reasons why your life insurance may not pay out. This means that if you do not provide all necessary documents, such as a death certificate or other proof of death, then your life insurance policy will likely be invalidated and the benefits will not be paid.
Additionally, if any documents are incomplete or inaccurate it could lead to further delays in processing your claim.
Furthermore, if there is evidence that suggests anything fraudulent was at play with regards to how the paperwork was filled out or submitted then again this could result in no payment being made on the policy.
All of these scenarios demonstrate why it’s important to thoroughly review and double-check all documents related to life insurance policies prior to submission so that there won’t be issues when it comes time for the payout should something happen.
The Bottom Line
In conclusion, the above-mentioned things are not covered by life insurance. It is important to understand the limitations of any financial protection products and make sure you select a life insurance policy that meets your needs.
Make sure you review your chosen policy carefully so that it provides you with all the coverage and benefits promised upon signing up for it.
Life insurance can be an incredibly beneficial form of financial protection; however, it pays to do due diligence as no single product covers everything.