Understanding Exclusion Clauses in your Life Insurance Policy

All life insurance policies have exclusion clauses that can lead to revocation of coverage. It is important to understand these clauses so that your heirs are not denied the insurance amount.

Material misrepresentation

Material misrepresentation, including intentional falsehoods or omission of important information, would lead to your policy being revoked. This includes factors that the company takes into account while deciding your premium or your eligibility for the policy. In most states, there is an incontestability clause, because of which the company cannot question a policy on the ground of material misrepresentation after a certain period. Thus, your heirs’ claim cannot be denied because of material misrepresentation if the insurance company did not object to your policy for that period, which is about two years in most cases.


One of the common ways in which a life insurance policy becomes invalid is suicide. Most policies contain a clause stating that the company will not pay the amount if the policyholder commits suicide within two years of taking the policy. Only the premiums are refunded. This is to prevent people who are contemplating suicide from taking a policy for the benefit of their family.

Private plane crash

Another common exclusion clause is the aviation clause, under which the amount of the policy is not paid if the policyholder dies as a result of a private plan crash. This does not include a crash while traveling on a commercial plane.

Dangerous activities

Most policies also have a dangerous activities clause, under which the company would not make a payment if the policyholder dies while taking part in certain dangerous activities such as rock-climbing or adventure sports. This clause can be removed, but a higher premium is charged if the policyholder wants to take part in these activities.

People in the insurance industry support exclusion clauses. They say that these clauses are not excuses for avoiding payment but they merely ensure that in return of the company fulfilling its obligations, the policyholders act appropriately. They also claim that unless the company feels that the policyholder did something wrong, they will not fight a death claim.

However, this is not entirely true as insurance companies often try to avoid a claim that comes in the first two years of a policy. Beneficiaries usually do not have the resources for a legal fight with the insurance company and end up losing the money.

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