Which Types of Death Are Not Covered by Life Insurance?

Life insurance covers death due to natural causes, illness, and accidents. However, the insurance company can deny paying out your death benefit in certain circumstances, such as if you lie on your application, engage in risky behaviors, or fail to pay your premiums. Here's what you need to know.

What Is Life Insurance?

A life insurance policy is a contract between you (the policyholder) and an insurance company. In exchange for you paying regular premiums, the insurance company agrees to pay a death benefit to your beneficiaries if you die.

Life insurance coverage provides a financial safety net that could replace your wages, or be used to pay off your mortgage or college costs for your kids. Less than 1% of death claims are contested each year, and many of those are ultimately paid. But beneficiaries and policyowners should be aware that it can happen.

What Does Life Insurance Cover?

In general, if you die due to natural causes, an illness, or an accident, your designated beneficiaries will get the life insurance payout. Here's a quick rundown of the types of deaths that are covered under life insurance policies:

Natural causes

Life insurance covers death due to natural causes. If you die of a heart attack, cancer, an infection, kidney failure, stroke, old age, or some other natural cause, your beneficiaries will receive the insurance payout.

Accidents

Your life insurance policy will pay death benefits to your beneficiaries if you die from a motor vehicle accident, drowning, poisoning, accidental drug overdose, or another tragedy.

Murder

The death benefit will be paid to your beneficiaries if you are murdered—unless your beneficiary murdered you or is closely tied to your murder.

Suicide

Life insurance covers suicide, so your beneficiaries will typically receive the death benefit. However, if the death occurs during the suicide clause period—typically the first two years of the policy—benefits will not be paid.

Pandemic Illness

If you have an existing policy and die of COVID-19, it's categorized as a natural cause and the insurance company will pay out the benefit. But what if you buy a new policy during an ongoing pandemic and lie on your application about your health or exposure to the illness? In that case, the insurer can refuse to pay out.

Which Types of Death Are Not Covered by Life Insurance?

If you don't die under the scenarios mentioned above, your insurer may not pay the death benefit to your beneficiaries. Here are the situations when your beneficiaries may be unable to collect benefits:

Risky Activities

Depending on your policy terms, you may not be covered if you die while participating in a risky activity. Risky activities include recreational pursuits that have an increased potential for injury or death, such as:

• Scuba diving
• BASE jumping
• Hang gliding
• Auto racing
• Aviation
• Rock and mountain climbing

Another category of risky activities includes certain jobs, such as working as a logger, aircraft pilot, offshore oil rig worker, construction worker, firefighters, and police officers. 

If you participate in risky activities, whether for fun or work, you can still buy a life insurance policy—but you might end up paying higher premiums. Also, depending on how risky the activity is, your insurer may add an exclusion to the policy that prohibits payments if you die while engaged in that activity.

Murder

Under state “slayer rules,” if your beneficiary murders you—or is somehow tied to your murder—they will not receive the death benefit. Instead, your insurer will pay the death benefit to your contingent beneficiaries or to your estate.

Suicide

In general, life insurance covers suicide. However, most policies have a "suicide clause" that spans the policy's first two years. Life insurance policies won't cover a suicide that occurs during this period, but all premiums paid will be refunded. 

Death claims can get tricky if a policyholder dies of a drug overdose during this period. However, to invoke the suicide clause and withhold the death benefit in an overdose case, the insurer would need to prove the overdose was intentional.

Other Reasons Life Insurance Won't Pay Out

Lying on the Application

Life insurance companies can withhold death benefits if you lie on your application. (That's insurance fraud, by the way.) Insurers can rescind your policy if they determine you made a material misrepresentation: a false statement that would have affected whether the company would have issued the policy or how much it would charge. 

For example, the insurer can cancel your policy, and your beneficiaries would lose out on benefits, if you lie about your:

• Family health history
• Medical conditions
• Alcohol and drug use
• DUI/DWI convictions
• Risky activities
• Traveling to or living in high-risk countries

Lying on the application can be grounds for the insurance company to deny a claim during the contestability period. This period typically lasts two or three years after the policy is issued, depending on state regulations. The insurance company can closely investigate any death that occurs during this time frame for up to two years afterward, delaying payouts.

Your Policy Expires

Term insurance only pays if you die during the policy's term, which can range from one to 40 years. Whole life is designed to provide benefits throughout your lifetime—as long as you keep paying your premiums.

Most life insurance policies provide a 31-day grace period for making late payments. If you die during the grace period, your beneficiary will receive the death benefit (minus the unpaid premium). However, once your policy lapses or the term expires, the insurance company will no longer pay benefits to your beneficiaries.

Illegal Activities

If you die while committing a crime or engaging in an illegal activity, the insurance company will usually deny the claim, and your beneficiaries will not be paid.

No Beneficiary

The death benefit payout gets complicated if you don't have designated beneficiaries—or if you do and they die before you pass away. In these situations, the death benefit goes to your estate and not necessarily to your loved ones.

It's essential to designate primary and contingent beneficiaries to receive the insurance death benefit in the event of your untimely death. Otherwise, the benefits are subject to probate, and they ultimately may not end up where you intended.

The Bottom Line

Life insurance can provide peace of mind and a valuable financial safety net for your loved ones. In general, policies cover deaths due to natural causes, illness, and accidents. Insurers sometimes withhold benefits in certain other situations. Be sure to read your policy's fine print to understand what's covered—and what's not.