Limitations and Exclusiond with Life Insurance
While life insurance policies generally have few exclusions, each contract is 
likely to include some limitations. The most common exclusions relate to:
- Aviation exposures.
- Hazardous occupations.
- Suicide.
- War risks.
Suicide Exclusion
A suicide clause in a life insurance policy states that the insurer will not pay the death benefit if the insured commits suicide within a certain period (usually two years) after the policy becomes effective. In some policies, suicide is excluded for only one year. The only payment the beneficiary receives in this case is a refund of the premiums paid less any policy loans. The suicide clause provides the insurer with some protection against an insured who purchases a life insurance policy with the intention of committing suicide.
After the policy is in effect for two years, suicide is covered since it is not likely that anyone who intends to commit suicide would buy life insurance and then wait two years to do it. Request a FREE Life Insurance Quote
Aviation Restrictions
When aviation exclusions are found in life insurance policies they usually apply only to pilots, student pilots, and crew members, or to occupants of military aircraft - these restrictions do not apply to fare-paying passengers on regularly scheduled airlines. Companies will often provide coverage for civil aviation deaths for an additional premium charge. Request a FREE Life Insurance Quote
Hazardous Occupations and Avocations
Today few applicants are declined life insurance because of their occupations. Firefighters and police personnel can purchase life insurance at standard rates. Even commercial airline pilots can usually purchase life insurance (although possibly at higher than standard rates). As a result, occupational exclusions are rarely found in modern life insurance policies.
An underwriter today is more likely to be concerned with hazardous avocations or hobbies. If an applicant participates in a hazardous hobby such as auto racing or sky diving, then the amount of insurance available may be limited, or an extra premium may be charged due to the additional risk. Depending on the hobby, the underwriter may want to include a waiver which excludes payment of the death benefit if death is caused as a result of participation in a particularly hazardous activity.
War and Military Service
Today, most insurers will provide some form of life insurance coverage for those on military duty. During war, a war-related death exclusion may be attached to new policies of insureds of military age. Traditionally, there are usually two types of restrictions or clauses which may be used.
- A status clause may limit the amount of insurance that a person is available for while on active military duty, or it may impose a higher premium to cover the higher risk involved.
- A results clause may exclude payment of the death benefit if the insured is killed as result of an act of war.
In cases where a war or military restriction applies to a death claim, the insurance companies will often refund the premiums paid (plus interest), or pay an amount equal to the policy's cash value, if greater. Request a FREE Life Insurance Quote
Prohibited Provisions
By law in most states, life insurance policies are not permitted to contain the following provisions:
- A provision that limits the time for bringing any lawsuit against the insurance company to less than one year after the reason for the lawsuit occurs.
- A provision that allows a settlement at maturity of less than the face amount plus any dividend additions, minus any outstanding indebtedness and overdue premiums.
- A provision that allows forfeiture of the policy because of the failure to repay any policy loan (or interest on the loan) if the total owed is less than the loan value of the policy.
- A provision making the soliciting agent the agent of the person insured under the policy or making the acts or representations of the agent binding on the insured (under the law, an agent represents only the insurance company, not the insured).
