When you pass away, life insurance provides financial support to your family.
The insurer pays out a death benefit to your beneficiaries when you pass away, as long as your policy is in force. Most causes of death are covered, including natural causes, accidents, and illnesses.
Continue reading to learn about which causes of death are covered and how you can ensure your beneficiaries receive a payout.
Does Life Insurance Cover Natural Death?
Yes, life insurance covers natural causes of death. Natural causes of death include old age, accidents, and illnesses.
Your beneficiaries receive the death benefit payout as long your policy is active when you pass away.
The insurer will not pay out if you have term life insurance and die after the policy term has expired.
A standard life insurance policy covers the majority of deaths, including those caused by bodily harm or natural causes. If you work in a high-risk occupation or have a risky hobby, your policy likely includes exclusions that allow the insurer to withhold paying the death benefit if the death occurs as a result of injuries received while participating in a prohibited activity.
For example, if your policy has a bungee jumping exclusion, and you pass away while bungee jumping, you may not be covered.
What Causes of Death Does Life Insurance Pay Out For?
Life insurance covers most causes of death. This includes natural causes, Covid-19-related complications, murder, and accidents.
- Natural causes. Your life insurance policy will pay the promised benefits if you die from natural causes, which includes old age and illnesses such as cancer, stroke, heart attack, and infectious diseases, among others.
- Covid-19-related complications. If you already have a life insurance plan and die because of Covid-19-related complications, your policy will treat it like any other death and pay the death benefit to your beneficiaries.
- Accidents. Your insurer will issue a payout if you pass away from injuries sustained in a road accident or any other accident.
- Murder. Your beneficiaries will receive the proceeds from your policy if you are murdered. However, if the primary beneficiary was involved in your murder, the payout will be handed to your contingent beneficiary or estate.
What Causes of Death are not Covered by Life Insurance?
If you die while your life insurance policy is active, your beneficiaries will likely receive the promised financial benefit. However, in some situations the insurance carrier may refuse to issue a payout.
The insurer may withhold the death benefit if you lied about your health, family medical history, vacation plans, or risky hobbies. Every life insurance policy has a contest-ability term, which is a limited time period during which the carrier can contest and refuse a claim.
The contest-ability period typically lasts two years from the date of policy issuance. If you die while the contest-ability period is still in effect and are determined to have made a serious deception, the insurance company may withhold your death payment. Any omission or false statement that can influence an insurance company's decision to accept or reject an application is considered material misrepresentation. A failure to disclose an underlying health issue, for example, constitutes significant misrepresentation and can result in the denial of a life insurance claim. When it comes to revealing your personal and medical information to the insurance, honesty is truly the best policy.
If you die while engaged in an activity on the exclusion list, the insurer will not payout. Exclusions in life insurance are events and conditions that are not covered by the policy.
If you participate in a hazardous pastime, your insurer may add an exclusion to your insurance. Your beneficiaries will not receive the death benefit if you die while engaged in the mentioned activity. An amateur pilot, for example, may be allowed to purchase coverage only with an aviation exclusion rider. If she dies as a result of injuries experienced in a flying accident, her insurance company will not pay.
Life insurance policies do not cover suicide in the first two years of the policy in Canada.
Criminal Activities and Reckless Endangerment
If you die while committing a robbery, trespassing, or any other illegal activity, your beneficiaries will not receive the proceeds from your policy. The insurer will also refuse to pay the death benefit if you pass away due to injuries caused by reckless endangerment, such as driving under the influence.
Because of the Slayer Rule, if the beneficiary of a life insurance policy murders the insured or is implicated in the murder, they will not receive the death benefit. This regulation prohibits a person from accepting benefits from someone who has murdered them. In this case, the payout will be made to the contingent beneficiary or the estate.
Acts of terrorism or war
Some life insurance carriers may exclude deaths caused by acts of terrorism or war. However, these exclusions are now not as common.
Is Suicide Covered by Term Life Insurance?
Suicide is usually covered by term life insurance, but only after the suicide clause expires. All life insurance policies include a suicide clause, which typically lasts for two years from the policy issue date. Insurance carriers will not pay the death benefit if the insured commits suicide during this period, though they may refund the premiums paid into the policy before the death. After the suicide clause ends, insurers will treat suicide like any other cause of death and will pay the death benefit.
The Bottom Line
Life insurance covers the majority of causes of death, including natural causes, illnesses, and most accidents. Suicidal death is also covered by life insurance policies if it occurs two years after the policy's issuance date. Insurance companies seldom decline life insurance claims, and when they do, it is usually due to material misrepresentation or death owing to excluded conditions or occurrences.
Speak to a Dundas Life expert if you have any questions regarding the causes of death your life insurance policy will and will not cover.
Frequently Asked Questions
Why would a life insurance claim be rejected?
Research shows that around 98% of life insurance claims are approved. The remaining 2% are rejected because of several reasons. These include:
- wrong information on the life insurance application
- suicide in the first two years of the policy
- death due to events or conditions included in the exclusion list
- policy lapse (either because of the expiry of the policy term or because of the nonpayment of premiums).
Does term life insurance cover all types of death?
No, term life insurance does not cover all types of death. However, all term life insurance policies cover natural death.
What causes of death does life insurance cover?
Life insurance covers most causes of death. This includes illness, suicide (after the suicide clause has expired), most accidents, and death from natural causes.
Gregory Rozdeba is the CEO of Dundas Life, Canada's leading digital insurance brokerage. He has over 8 years of experience in the life insurance industry. Gregory previously served as Director of Sales at a Toronto-based insurtech firm. He took the company from having no product to raising over $7.6M+ in venture capital to transform the prospect to policy process in Canada. Gregory holds a Bachelor's Degree in Finance & Accounting from Ontario Tech University and a Master of Information Management from FH Joanneum.