Life insurance: Small print and policy exclusions
While the principles behind life insurance are fairly straightforward, with the range of policies available, and the exclusions and caveats associated with each plan, it can quickly become complicated.
In This Guide:
Term insurance will cover you for a certain fixed period, so if you die within the set period, your policy will pay out. If you happen to live beyond the fixed term, you will not be covered any more.
Whole-of-life cover on the other hand, as the name suggest, will pay out in the event of your death, no matter when that is.
However, every life insurance policy will include certain exclusions and certain conditions which have to be met in order for your policy to actually pay out.
First and foremost, it is important to note the necessity of full disclosure when it comes to life insurance.
The insurance provider is acting totally within their rights if they cancel your policy if they find that when applying, you did not disclose all of the relevant “material facts” that may relate to your cover.
This is the case with all insurance, not just life insurance, so for example a car insurance provider might cancel the policy of a customer who has failed to disclose a previous motoring conviction they had.
When it comes to life insurance, the material facts you must be open about generally amount to any and all health problems you might have experienced throughout your life.
In general, when you compare life insurance, insurance providers will make every effort to ask any and all relevant questions during the application process in order to draw out from you all of the relevant information. This is down to governmental pressures for insurance companies to do so.
However, while the insurance company will make every effort to ask all of the necessary questions, the burden is still on you, as the customer, to make sure you disclose all information that could pertain to the validity of your policy.
Policy exclusions and small print
Many insurers will exclude certain people from being covered based on excessive risk associated with their personal circumstances.
For example, if your job involves considerable risk, say if you work on an oil rig or if you are in the army, you may find yourself refused cover.
The same goes if your lifestyle involves considerable health risks, if you are a heavy smoker for example. This includes partaking in particularly risky past times like sky diving or some motor sports.
And if you have a history of or genetic tendency towards certain serious health issues like diabetes or very high blood pressure, you might also have trouble taking out a life insurance policy.
This is not set in stone though; there are several providers who will offer cover to those who would be turned down by others, you might just find yourself paying more than you would otherwise.
As well as exclusions based on your lifestyle generally, there are certain circumstances under which many life insurance policies will not pay out, for example:
- If the death of the insured party is self-inflicted
- If the death is caused by misuse of drugs or alcohol
- If the death is due to involvement in terrorist activity or war
- If the death is caused by reckless activity or gross negligence
You will be pleased to know though, that only a small proportion of life insurance pay outs are actually turned down in the UK.
You should always check the policy’s small print in order to work out exactly under what circumstances your policy might become invalidated.
As well as issues with exclusions, the policy small print will let you know things like whether or not your premiums are fixed throughout the policy’s existence, or whether they will change after a certain time period or according to any health problems you might acquire during the duration of the policy.