Exclusions in Life Insurance Policies

I often get asked about exclusions - i.e. what don't they pay on.

In the Life Insurance cover world, the common expectation is that suicide is excluded - and that is partly true.  Mainstream Life Insurance companies generally exclude suicide in the first 13 months of the policy - thereafter they will pay a claim for suicide.  The reasoning being that if you're intent on ending your own life, you're unlikely to wait 13 months.

The other condition that could cause the insurer to deny a claim is if you haven't been 100% truthful when completing the application form.  If you don't tell the whole truth, the insurer may be within its rights to deny the claim.  There are some complex rules around this that are beyond the scope of this blog.

For most mainstream life insurers, (i.e. those for which life insurance is their main business), these are the only exclusions contained in their policies, however, for insurers owned by banks, there is often another exclusion that could be disastrous. They often contain an exclusion along these lines:

"No benefit will be paid if the death is caused by war, invasion, act of foreign enemy, hostilities (whether war is declared on not), civil war, military or usurped power, rebellion, revolution, insurrection riot or civil commotion."

Now that doesn't seem too bad, but consider these possibilities:

*   In 1999, a lady was tragically killed on a picket line on the wharf at Lyttelton wharf.  Could a strike/picket line be called a "civil commotion"?

*   Last year, my brother went to Western Samoa for a holiday, to find roads blocked as there was a problem ahead with locals indiscriminately using firearms.  If he'd been accidentally shot, could his death be said to have been "caused by rebellion, revolution, insurrection riot or civil commotion."

*   If you had been visiting Fiji at the time of any one of the coups d'etat, and inadvertently been shot to death,  I suggest that you certainly would not be covered by many of the bank life insurance policies.

*   In 1981, during the protests at the Springbok tour, there were many ugly situations that could have resulted in a death.  These could easily have been labelled as a riot or civil commotion, and the bank insurer would have denied any resulting death claim.

So, I guess that the message is:  when buying life insurance (and any other insurance), make sure that the small print doesn't contain any nasties such as these.  It's too late to find out at claim time.