When does life insurance pay out?

29 March2012
Life insurance details

When you have bought a life insurance policy to protect the ones you love, you want it to benefit them after you die. It can therefore be worrying to find out that there are factors that could prevent the payout.

For an insurer to refuse to pay out, however, there has to be a particular set of circumstances. If none of the terms and conditions of the policy are broken, your family will be protected. Here are some common factors that could prevent a payout, and how to avoid them:

Lying on your application

When you apply for life insurance you are asked an often long list of questions. You must answer all of these honestly and to the best of your knowledge. Willingly withholding information, or outright lying, could be extremely damaging to your family's chances of a payout if your insurer finds out about it after your death.

A common thing some people are tempted to lie about on insurance applications is smoking, because non-smokers often get much lower premiums. If your insurer finds out that you are, in fact, a smoker, but you said you weren't, it could stop your payout.

Not keeping up with your payments

If you stop paying your monthly premiums, your cover will cease.

If you die in a certain way that is not covered by your policy, it can also jeopardise your life insurance. Some common death exclusions are:


It is often extremely tricky to figure out somebody's exact motive for taking their own life. It is possible for people to take out expensive life insurance policies because they plan to kill themselves and want to leave something behind. Other people may see it as a way to get their family out of debt. Even if the motive is completely unrelated to any life insurance policy, this is often impossible to prove. Most insurers therefore do not cover suicide on their policies.

Drug and alcohol abuse

If you die as a direct result of drug or alcohol abuse, this is considered a self inflicted death, which probably won't be covered by your policy.

Deliberate exposure to danger and/or gross negligence

If you willingly put yourself in a dangerous situation, and you are aware that being in that situation could be fatal, if you die it is considered self inflicted. There may be an exception to this on some policies - for example, if you were in that situation in order to save a human life.

Illegal activity

Most insurers cannot cover you if you die as a direct result of committing a crime.

Taking part in extreme sports or dangerous pastimes

Some insurers won't even sell you cover you if you tell them that you take part in extreme or dangerous hobbies on your application. Others will insure you, potentially at a higher cost, under the condition that you will not be covered if you die as a result of those activities. You therefore may not be covered if you die as a result of cave diving, mountaineering, martial arts, boxing or other extreme pastimes. Flying activities are also not included, with the exception of being a passenger in a commercially licensed aircraft.

There may be other exclusions in your particular policy. It may give you peace of mind to familiarise yourself with them, so you know what you are covered for.

Click here to find out more about life insurance.

Image iStockPhotos / Igor Dimovski

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