If you pass away from natural causes such as a heart attack, cancer, stroke, or old age, life insurance providers will pay out the entire death benefit to your beneficiaries, provided that your policy is in force.
However, it’s important to note that the circumstances surrounding your death and the actual cause of death can sometimes invalidate your insurance policy. There are specific situations where your life insurance policy benefits may not be payable, as there are certain exclusions.
In this blog post, we will discuss both the types of deaths covered and those not covered by your life insurance policy.
Does Life Insurance Cover Natural Death?
Yes, it does. If you pass away due to natural causes such as a stroke, cancer, or old age, your life insurance policy will pay out, ensuring your family receives the full death benefit.
As long as your insurance policy is active and up-to-date, the insurance company will smoothly process your death benefit claim without any obstacles. This coverage applies to both term life insurance, which covers natural causes of death within the policy term, and whole life insurance, providing lifelong coverage, even for illnesses related to old age. Importantly, life insurance policies also cover death resulting from COVID-19.
However, it’s essential to know that if you work in a high-risk occupation or engage in risky hobbies, your policy likely includes exclusions. These exclusions give the insurer the right to withhold the death benefit payment if your death results from injuries sustained while participating in prohibited activities.
What Other Types Of Death Does Life Insurance Cover?
Life insurance provides coverage for a wide range of causes of death. This includes natural causes, complications related to Covid-19, homicide, and accidents.
- Accidents: If your death results from an accident such as a motor vehicle crash, plane crash, drowning, or any other unforeseen tragedy, your insurance policy will pay out the death benefit to your beneficiaries.
- Homicide: In the unfortunate event of your murder, your beneficiaries will still receive the death benefit payout. However, it’s important to note that if your beneficiary is responsible for your murder, the insurer will withhold the payout.
- Pandemic Illnesses: If you pass away due to COVID-19 while your insurance coverage is in force, it is considered a natural death, and your insurer will provide the death benefit to your beneficiaries.
What Types Of Death Are Not Covered By Life Insurance?
While a life insurance policy typically provides coverage for deaths resulting from natural causes, accidents, and homicide, there are certain circumstances that may prevent a payout, commonly referred to as exclusions.
If your demise doesn’t result from one of the natural causes, some Canadian insurance companies may not provide the death benefits to your family.
Here are some common exclusions:
- Murder: According to the Slayer Rule, if it’s determined, following an investigation, that your beneficiary was involved in your murder, they won’t receive your death benefit. Instead, the insurance company might pay it to your estate.
- Suicide: Generally, life insurance covers suicide, but there’s usually a “suicide clause” in most policies, typically within the first two years. During this period, insurance companies won’t pay out the death benefit in case of suicide.
- Risky Activities: Depending on your policy, some insurers may exclude coverage if you die while participating in risky activities like scuba diving, parachuting, auto racing, hand gliding, rock and mountain climbing, or base jumping, among others.
- Hazardous Jobs: Certain occupations, such as offshore fishermen, pilots, loggers, and offshore oil rig workers, may require higher premiums for death benefits. Insurers might also add exclusions to the policy, refusing payout if you pass away while engaged in risky work-related activities.
Other Reasons Life Insurance Won’t Pay Out
Also, there are some rare situations that can hinder an insurance company from paying your death benefit on a life insurance policy.
- Illegal activities or reckless endangerment: If you die while driving recklessly under the influence or while committing a crime, life insurance companies will not pay the death benefit of your insurance policy to your beneficiaries.
- Lying on your application (Insurance fraud): Your life insurance death benefit can be withheld if you lie on your application. Your insurer can cancel your policy if they discover you lied about your travel plans, medical conditions, family health history, alcohol and drug abuse, or risky activities.
- Geography: If your life insurance policy contains a specific geographic location listed as an exclusion, it means that if you were to pass away while you are in that particular place, your beneficiaries will not receive the death benefit from your policy. These excluded locations are often chosen based on the travel restrictions imposed by the Government of Canada. To illustrate this, imagine your life insurance policy lists certain regions or countries where coverage is not provided. Let’s say one of these excluded areas is a remote, politically unstable region that the government advises against travelling to due to safety concerns. If, unfortunately, you were to meet an untimely end while in that region, your life insurance company might use this exclusion to deny the payout to your beneficiaries.
- Acts of Terrorism or War: Some life insurance carriers may exclude deaths caused by acts of terrorism or war, though these exclusions are now less common.
What Happens To Your Life Insurance Policy If You Have No Beneficiary?
If you haven’t designated any primary or contingent beneficiaries for your life insurance policy, or if your chosen beneficiaries pass away before you, the process of receiving the death benefit becomes more complex.
In such a scenario, the death benefit is directed to your estate rather than going directly to your family or loved ones. This means that the payout will become part of your overall estate.
However, when there are no designated beneficiaries, the death benefit must go through probate, which is a lengthy legal process where the court determines how your assets, including the life insurance proceeds, will be distributed. This can delay your family receiving the funds, as the court needs to settle matters according to legal guidelines.
Furthermore, it’s important to note that if the death benefit is funnelled into your estate, your family may also be subject to estate taxes on this amount, depending on the applicable tax laws in your jurisdiction.
To ensure a smoother and more direct transfer of your life insurance proceeds to your loved ones, you should name beneficiaries and keep this information up-to-date in your policy.
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- Term Vs Whole Life Insurance: Which Coverage Is Best?
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- Revocable vs. Irrevocable Beneficiary in Insurance (2024)
Final Thoughts on Does Life Insurance Cover Natural Death
So, does life insurance cover natural death? The answer is yes. In most cases, life insurance does cover natural death. However, as we’ve seen, there can be exceptions and important details to consider.
Remember, securing the right life insurance policy tailored to your needs is crucial to providing peace of mind for you and your loved ones. If you have more questions or need assistance in finding the perfect policy, don’t hesitate to reach out to our insurance advisors today. Let’s ensure your future is safeguarded, no matter what it holds.
FAQs on Does Life Insurance Cover Natural Death
What happens if you die a month after getting life insurance?
If you die a month after getting life insurance, the insurance company can contest or deny your beneficiary’s claim. However, they can contact an experienced insurance professional for advice or seek counsel with an insurance lawyer.
Do you get life insurance if you die of old age?
As mentioned above, your insurance policy will pay out your policy’s death benefit to your beneficiary if you die of natural causes, which includes old age.