Life insurance can be a tricky thing to understand, what with the logistics and technical terms associated with policies. And in the confusion of trying to learn about your policy, it is very easy to miss or misinterpret what your specific policy does and does not cover. That is why I have decided to write a two-part blog; the first part deals with things that policyholders do not realize is covered by life insurance, and the second part deals with things that are covered by life insurance.
Most insurers require that you disclose whether or not you are a smoker before they even determine your eligibility, but there is the possibility that you could pick up smoking after you purchase a policy. If that is the case, in most situations, insurers do include clauses that state they reserve the right to cancel your policy in the event of a smoke-related illness, like cancer or heart disease. In this case your heirs or beneficiaries would not be able to receive any money from the policy in the event of your death.
This is probably one of the most surprising, and uncommon, situations that is usually not covered by a life insurance policy. I know what you are thinking: “Are these life insurance companies so heartless that they wouldn’t cover soldiers who are giving their lives for our country?” But that is not the case. These clauses actually refer to civilians or those who happen to be caught in the crossfires of an act of war. For example, if you were to travel to a part of the world that is in the midst of a conflict and were unfortunate to be killed due to a bombing, your life insurance would not pay out. Again, while it is an unfortunate situation, it is not terribly common.
Most life insurance policies will not cover suicide, at least within the first two years or so, also known as the contestability period. After this period, most companies will actually pay out. Before this period, however, most insurance companies will not.
I would like to note that not all of these are universal. You could have a life insurance policy that does, in fact, cover one or all of these. If you are unsure, make sure to check your policy and find out. And if you are in the process of looking to purchase a policy, these are definitely questions to ask your agent.
Make sure to come back next week for the second part of this blog: “3 Things your Life Insurance Does Cover.”