Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona
Video Transcript: Today's question is, "What does life insurance not cover?" Well, during the first two years of the life insurance policy from the day that it's issued, they don't cover suicide. And if there are material misstatements or fraud in the contract, the death claim could be in jeopardy from being paid. So, you always want to be able to be honest about all your issues in the contract application, all the questions.
By the way, that includes smoking. Some people try to say, I am not a smoker, when they are. And if they find that out, there could be elements of fraud or misrepresentation on the application that again, could put in jeopardy your death claim.
So, I always say, be as honest as you can on the application. Just tell the truth. And remember, they don't pay on suicide during the first two years. It's called the contestability period.
The only thing that all life insurance policies do not cover is death due to suicide in the first two years of the policy. Some policies will exclude death caused during the commission of a crime, or by acts of war or terrorism. Others could have a stipulation, such as death caused by parachuting, but that will be an exception stated explicitly in your policy for your particular situation.
Life insurance pays for death due to old age, anything health related, and accident. This covers the vast majority of causes of death.
Life insurance covers the life of the insured. There are a few exclusions within the first two years. These two years are known as the contestability period. This time period gives the life insurance carrier time to investigate as cause of death to see if an illness was missed during the underwriting period. Another common cause of death to be excluded under the contestability period is a suicide. After the two year contestability period most companies will pay the death benefit regardless of the cause of death unless fraud can be explicitly proven or an activity such as racing, skydiving, rock climbing, etc. is excluded upon issue of the coverage.
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By the way, that includes smoking. Some people try to say, I am not a smoker, when they are. And if they find that out, there could be elements of fraud or misrepresentation on the application that again, could put in jeopardy your death claim.
So, I always say, be as honest as you can on the application. Just tell the truth. And remember, they don't pay on suicide during the first two years. It's called the contestability period.
Life insurance pays for death due to old age, anything health related, and accident. This covers the vast majority of causes of death.