When will my life insurance not pay out?
Suicide - the life insurance policy will not pay out a death benefit if the cause of death is suicide and it occurs within a certain period of time, often referred to as the “incontestability period” and varies between each state, typically it is 1-2 years. If the insured passes away during the incontestability period and the cause of death is suicide, the beneficiary will only receive the premiums paid into the policy, not the death benefit. Fraud - if the insured dies within the incontestability period from smoking, other health-related issues, or a dangerous activity, the life insurance company has the right to investigate and determine whether the insured was providing accurate information at the time of the application (and not lying on the application to improve rates). If the insured purchased a term policy and began smoking after purchasing the term policy, the insured will no longer qualify for non-smoker rates. Universal and whole life policy premiums are locked in for life. This may cause your premiums to increase but you will then not be subject to the “material representation clause”, which states that you cannot lie on your life insurance application otherwise the insurance company has the right to deny the life insurance claim. Illegal activities - if the insured dies while participating in an illegal activity, the life insurance company has the right to deny the claim. Act of war - if the insured dies as a result of an “act of war”, such as a journalist who travels to dangerous locations for his job, the life insurance company has the right to not pay out his death claim. Living in another country - although most policies will allow the death benefit to be paid out if the insured is living in another country, it’s important to read the policy details and make sure there is no clause stating that the policy will not be paid out if the insured is residing in another country at the time of death.
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