I had a customer call today with a question about whether his in force policy would cover him in case his birthday present, a chance to sky dive, didn’t work out so well.
His policy has been in force with for 6 years and at the time he took it out he didn’t have any plans to take up sky diving and wasn’t soliciting birthday presents for dangerous hobbies. Being a prudent and cautious guy he called customer service and checked to make sure he was covered and he apparently either asked the question wrong or someone misunderstood something. The customer service agent told him that since he had answered no to the dangerous hobbies question on his application he would not be covered for skydiving.
Now, I truly believe there must have been some bad communication going on because that simply isn’t true. Even if he had a desire to sky dive at some point when he took the policy out, he would still be covered because the question asks if he has sky dived in the past two years or intends to in the next two years. Even the question understands that once the period of incontestability is over, the company doesn’t get to look back and re-underwrite anything.
Maybe it would be clearer if I work from the other end. This is how the insurance company would not have to pay. If this guy got a birthday sky dive, or he if was actively planning to take up sky diving, and he took out a life insurance policy at that time and didn’t divulge that information and died in a sky diving accident in the first two years of the policy, no death benefit. Materially misrepresenting relevant underwriting information is grounds for denial of a claim for the first two years of the policy.
If you take that same scenario and he doesn’t die until the third year, the claim is paid. So, this customer with a policy in force 6 years who had no plans to jump when he took it out can do anything he wants and know that he will be covered without question.
Bottom line. Built into the premium of every life insurance policy is the assumption that habits will change and people will not remain stagnant in the place they were during the life of their policy. People who are smokers will quit and some that don’t will start. People that ride in airplanes will start jumping out and people that were passengers will become private pilots. Those things don’t impact your life insurance policy.
My 20 years of experience give me the knowledge and leverage to find reasonably-priced life insurance for people who have been declined or are paying more than they need to.
That’s a relief to know. But I wondered whether certain dangerous activities mightn’t be part of a standard exclusion. Is there any meat to that matter? It has been my understanding that wartime deaths, at least, are traditionally excluded from coverage. Is that so?
Kind of a strange question coming from a large insurance agency, but oh well….The only standard exclusion is suicide. Also anything that is materially misrepresented can be used during the first two years to deny a death claim, the incontestability period. That excludes lying I guess.
You can accept an exclusion for aviation and skydiving, but short of requesting the exclusion, it is either approved at a higher rate or declined. You cannot exclude health conditions or foreign travel to dangerous areas, for instance. “Acts of war” used to be a standard exclusion but has been absent from standard life insurance coverage for at least 15 years that I know of