Hazardous Activity

What Is a Hazardous Activity?

Hazardous activity refers to a recreational pursuit that life or disability insurance policy considers high-risk. The activities are not typically covered by insurance as they carry an increased potential for injury or loss. Hazardous activities include scuba diving, BASE jumping, hang gliding, race car driving, flying a plane, horseback riding, bungee jumping, parasailing, and off-roading. Further, some employment falls into this category such as some construction work, logging, aircraft pilots, offshore oil rig worker, offshore fisherman, structural steelworkers, and underground mining.

If a hobby falls under an insurance company’s definition of hazardous activity, the policyholder may not be able to purchase a life or disability insurance plan, or they may pay a higher premium because the insurer considers the action high-risk. Another possibility is that the insurer will issue a policy, but it will explicitly exclude the hazardous activities from the coverage. The insurance policy will not pay benefits for death or disability from a designated hazard, but will still provide benefits for other covered accidents and events.

Key Takeaways

  • Hazardous activity is a hobby or activity that an insurance policy considers to be high-risk.
  • These types of activities are typically not covered by standard life or disability insurance policies due to the increased risk of injury or loss.
  • Activities may take the form of a hobby or be a particular line of employment.
  • Examples can include hang-gliding, piloting small aircraft, or race car driving, among others.
  • Adventure Activities Coverage is an insurance rider that requires an additional premium to provide coverage for a high-risk hobby or job.

Understanding Hazardous Activity

Some policyholders may omit a dangerous hobby or work on their insurance application to secure approval. Not being truthful on an application for insurance is fraud, called non-disclosure. The 1984 Insurance Contracts Act made it a duty to disclose all information that can reasonably be relevant to the final decisions of the insurer.

The insurance provider has corrective actions it may take if it learns the applicant lied on the application for coverage. During the underwriting process, the insurer will review medical records and past insurance coverage, noting injuries sustained from hazardous activities. The insurer may deny the application or adjust the policy and premium payment to reflect the hazards covered. When the insurer learns of dangerous nondisclosed enterprises after writing a policy, it may demand back payment of adjusted premiums, limit the benefit payment for death or dismemberment or even cancel the insurance policy as a whole.

It is essential to understand that not all insurance providers consider the same activities hazardous. Also, the occasional participation in a hazardous activity, such as going scuba diving for the first time on a vacation, will not necessarily classify you as a high-risk applicant.

Special Considerations

Some disability policies have exclusion riders. Alcohol and substance abuse limitations are key examples of exclusions. Coverage for a disability arising from substance abuse or alcoholism is often capped at two years, but in some cases may not be covered at all.

Prescription medication may also trigger the substance abuse limitation. Some medications are easily abused, and insurers may argue you are taking more than warranted for your injury or illness. If the substance abuse limitation kicks in, your legitimate insurance claim for a physical condition may be restricted or even denied.

Other exclusions may include some lesser-known exclusions, including:

  • Injuries caused by aircraft (except to passengers on scheduled airline flights)
  • War or acts of war
  • Suicide attempts
  • Normal pregnancy
  • Injuries on the job
  • Intentional acts causing disability

Smoking is also considered a hazardous activity. Insurance companies maintain separate rate schedules for smokers (who pay more) and non-smokers.

Alternative Coverage for Hazardous Activity

Some travel and sports insurance companies work with extreme sports enthusiasts and adventure travelers by offering Adventure Activities Coverage. This insurance is not the standard travel insurance that protects from lost luggage, canceled flights, and medical emergencies. The design of adventure activities insurance specifically addresses the needs of those with more extreme pursuits or lifestyles. It often comes in the form of an exclusion waiver, since most travel insurance plans exclude coverage for adventurous activities and hazardous sports.

One hazardous activity that sometimes manages to avoid exclusion is scuba diving, depending on the level of education and experience of the participants. More specifically, some insurers provide plans in which Scuba divers who are Professional Association of Diving Instructors (PADI) or National Association of Underwater Instructors (NAUI) receive coverage in the base plan without the need for an extra rider, and thus additional costs. Most other adventure activities would require an additional rider at an extra charge.

Real-World Example

In India, the South Mumbai District Consumer Disputes court upheld a ruling during an appeal from Nagin Parekh. The court was hearing a complaint that Mr. Parekh entered against an insurance provider who denied coverage for an accident he had during a 2012 ballooning trip.

Parekh was on an organized hot air balloon ride when the balloon suddenly lost altitude. The balloon's basket landed roughly, and the pilot and co-pilot jumped out. Before the basket could be secured the balloon craft rose into the air again, carrying Parekh and other adventurers aloft. The balloon again crashed into the ground, more violently this second time, and Parekh sustained injuries to both of his legs and received treatment for fractured bones.

Parekh's insurance denied medical and disability coverage and rejected his claim for reimbursement. The company stated, "one who went for the ride did it at [their own] "self-risk" which the appeals court upheld. The court ruled that "hot air balloon riding always involves [a] high-risk of life and it is hazardous in nature."

What is considered high risk for life insurance?

High-risk activities are a concern for life insurers because they can cause an untimely death for someone who is insured, earlier than actuarial models would otherwise predict. Such activities may include piloting aircraft, paragliding, bungee jumping, scuba diving, racing cars, off-roading, and so on. The exact activities will vary by insurer.

What is a high risk policy?

High-risk policies insure individuals that are more likely to have a claim, whether it be an aggressive driver or an ill individual. Such policies will be at a higher cost and may have certain other limitations.

What can disqualify you from life insurance?

You may not be approved for life insurance during the underwriting process if they deem you to be too high of a risk. This can come from a combination of lifestyle, health, family history, and financial situation. In addition, if you are found to be lying on your insurance application, it will disqualify you from coverage.

Article Sources
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  1. The Indian Express. "South Mumbai Consumer forum says no to mediclaim, calls ‘hot air balloon hazardous activity’."