Less than people fear, and the exceptions are narrower and more specific than the internet suggests. A life insurance policy in force past its second anniversary, bought with honest answers, pays for nearly every cause of death there is.
The exceptions cluster in three places: the first two years of the contract, a short list of written exclusions, and what was said on the application.
The contestability period
Every life insurance policy sold in the United States contains an incontestability clause, and the period is set by state statute. New York Insurance Law section 3203(a)(3) requires that “the policy shall be incontestable after being in force during the life of the insured for a period of two years from its date of issue.” Most states use the same two-year period.
What that means in practice runs in two directions.
Inside two years, the carrier may investigate a claim and rescind the policy if it finds a material misrepresentation in the application. Death from any covered cause is still paid, but the file gets read. The carrier orders medical records and compares them to the answers you gave. If a condition was omitted and it was material to whether the policy would have been issued or at what rate, the carrier can deny the claim and return the premiums.
After two years, the door closes. The carrier cannot contest the policy for misrepresentation, in most states even where the misstatement was deliberate. Two years of premiums buys a contract that has to be honoured.
The contestability period restarts on a new policy, and it also restarts on a reinstated one. A policy that lapsed and was put back in force starts a fresh two-year window, which is a detail worth knowing before deciding to let a policy lapse and reinstate later.
The suicide clause
Separate from contestability, though usually the same length. Most policies exclude death by suicide during the first two years, in which case the carrier returns the premiums paid rather than the face amount. Some states set the period at one year.
After that period ends, death by suicide is covered like any other cause. That surprises people, and it is worth stating plainly, because families sometimes do not file a claim at all on the assumption that it will be refused.
If you or someone you know is struggling, this is a subject worth talking to somebody about, and I can point you to support resources if that would help.
Material misrepresentation on the application
This is the largest single cause of denied claims, and it is entirely within the applicant’s control.
Carriers do not rely on the honour system. They query prescription databases, which is how an undisclosed condition usually surfaces, because the medication is the tell. They query the MIB, an industry database recording coded information from prior applications, which catches inconsistencies between what you told one carrier and what you told another. They pull motor vehicle records. On many cases they order an attending physician statement from your own doctor.
The categories that get people into trouble are predictable:
- Tobacco or nicotine use. The lab work at the exam tests for cotinine, so this one is checkable directly.
- A condition diagnosed but not yet treated, or one the applicant considered resolved.
- Alcohol or substance use history.
- Dangerous hobbies not disclosed, such as scuba, climbing or private aviation.
- Foreign travel to countries the carrier restricts.
- Income or net worth overstated on a large face amount.
The honest disclosure is almost always the better outcome. A disclosed condition produces a rating, which is a higher premium on a policy that pays. An undisclosed one produces a policy that may not pay at the moment it is needed. And an independent agent can take a disclosed condition to a carrier that underwrites it well, which is a route that does not exist once the answer is already wrong.
Written exclusions
Beyond the first two years, the actual list of exclusions in a modern policy is short.
Aviation. Commercial air travel as a passenger is covered everywhere. Private piloting, student piloting, experimental aircraft and aerobatics are commonly excluded by rider or charged a flat extra. A pilot who discloses hours, ratings and aircraft type can usually get covered; one who says nothing has a problem.
Hazardous activity. Some policies carry a rider excluding death arising from a named pursuit: technical climbing, cave diving, motor racing, base jumping. This is a rider on the contract, not a general principle, so read whether one is attached.
War and military service. Older contracts and some group policies contain war clauses. Most individual policies sold today do not exclude military service, but coverage for active-duty personnel is an area where the carrier matters and the contract needs reading.
Death during commission of a felony. Present in many contracts, rarely litigated.
Illegal drug use. Where death results from use of a controlled substance not prescribed to the insured, some contracts exclude it.
Notice what is not on that list. Death from cancer, heart disease, stroke, dementia, an accident, a car crash, a workplace injury, a natural disaster, or an illness the insured did not have when the policy was issued, is all covered. So is death overseas, in almost every ordinary case.
What actually stops a claim being paid
In practice, three things, in descending order of frequency.
The policy lapsed. A missed premium and an expired grace period end the contract, and no exclusion is needed. This is the most common reason a family discovers there is no coverage.
Nobody knew the policy existed. A carrier does not learn its insured has died until somebody files. Unclaimed benefits sit at carriers for years and are eventually escheated to the state.
The beneficiary designation was stale or blank. A benefit that pays to the estate goes through probate and to creditors first. A benefit naming a person who died first, with no contingent, does the same.
All three are administrative and all three are fixable in an afternoon.
What to do
- Answer the application completely, including the things you would rather not mention.
- Keep the policy in force. Set up automatic payment and know the grace period.
- Tell your beneficiary that the policy exists, which carrier holds it, and where the paperwork is.
- Name a contingent beneficiary on every policy.
- If you already have a policy and are not sure what it excludes, read the exclusions page, or send it to somebody who will.
Apex reviews in-force policies clients bring us, including ones written elsewhere. If you want to know what your contract actually says before anyone has to claim on it, talk to a member of our team. You can also read how a benefit passes at death.
Policy provisions and state law vary. This is general information, not legal advice, and no policy is bound until a carrier issues it in writing.
