Common exclusions and limitations in term life insurance policies

There exist some common limitations and exclusions in the term life policy that may impact the amount paid out on death benefit. One of the very common exclusions encountered is a suicide clause. It normally states that upon the death of the insured by his or her own hand within a certain period, generally the first two years of the policy, the insurer is allowed not to pay the death benefit. This clause is to stop people applying for policies then killing themselves in the near future, generating money from insurance. If death happens after this time, the policy will usually pay out .

One more limitation involves dangerous activities/occupations. Many term life insurance policies exclude coverage for deaths arising from dangerous activities or occupations. For example, insurers may consider skydiving or rock climbing to be too risky. The insurer may then offer an individual with hobbies or occupations that are considered risky a policy at enhanced premiums, exclude these activities from coverage, or deny the claims relating to injuries or death while engaging in such activities. This is because high-risk activities raise the possibility of accidents or injuries to a great extent, hence affecting the risk factor of insurers considerably.

Further exclusions may include death from criminal activities or illegal acts. If the insured dies while conducting illegal activities, it is possible that there will be no cover provided by the policy. Similarly, other policies exclude cover in cases of death while in certain situations like war or terrorist acts depending on the terms of cover. It is very important that a policyholder goes through the terms and conditions laid down in the term life insurance policy document properly so that all exclusions and limitations are understood properly.

The general exclusions and limitations under the policy are as follows; understanding them is very important for knowing what all inclusions and exclusions are covered. The clear understanding of the same will help you in making an informed decision regarding your coverage and take steps to mitigate any gaps or concerns.