The basic concept behind life insurance is a simple one: if the insured dies while covered by the policy, the beneficiaries receive a payout for the coverage amount. However, few things in the financial world are straightforward, and nowhere is this more true than with life insurance.
As with all areas of insurance, providers are performing a balancing act when setting premium levels. Because of this, there are some situations that fall outside acceptable risk levels and will make insurers unwilling to enter into the bargain. These are known as exclusions and come in two types: those that can hinder an application being approved, and those that can lead to claims being denied.
By declaring these details on a form, an insurance application could either be turned down or the insured may have to pay higher premiums if approved.
- Employment in a high risk occupation, such as the armed forces, some types of construction work, or in parts of the oil industry.
- Regularly taking part in extreme sports or other risky activities.
- Serious pre-existing health problems, or a history of them. Examples of these conditions can include cancer, diabetes, or high blood pressure.
- Suffering from mental health problems such as depression, now or in the past.
- Potentially dangerous lifestyle issues such as obesity, smoking, or substance abuse.
- A family history of hereditary disease.
During the insurance application, it may be tempting to gloss over any of these factors in the hope of getting lower premiums, but if this is done and is later found out, the policy could be invalidated and any claims denied.
Considerations which can lead to a claim being rejected will be covered in a policy document’s small print, either explicitly or under more general clauses which are open to interpretation, and so seeking professional advice is a good idea before buying an insurance package. These are just some of the circumstances under which claims could be denied:
- If the death was directly caused by substance misuse, including alcohol or narcotics.
- When the death was the result of an act of war or terrorism.
- If the death was brought about through suicide or self-inflicted injuries.
- When the death was caused by the deceased’s own gross negligence or recklessness.
The key point to note is that all these exclusions will be specified in the insurance documents, and there’s little chance of finding a way around them once signed up for a policy. Insurance that doesn’t provide the coverage expected can be even worse than having none at all, so it’s vital to get proper advice from a professional agent when putting protection in place.