If you never return from your sailing trip around the globe or reemerge from the deep ocean depths on the submarine destined for the Titanic, will your family receive the death benefit proceeds from your life insurance policy? That answer, as well as the answer to many legal questions is, “that depends.”
Life insurance policies have become common for many individuals and families that wish to ensure their loved ones are financially secure after the death of the insured. Life insurance policies can be utilized to fund buyouts or sales of corporate interests, help lessen the estate tax burden, and can provide critical liquidity to a family at the beginning stages of trust and estate administration.
Life insurance is so common that many families believe that the claim submission process and payment by the insurance company are a forgone conclusion. Unfortunately, that is not always the case and insurance companies have written provisions into the policies that exclude payout in certain circumstances.
First, and most importantly, it is critical to determine whether the life insurance policy is an “accidental death” policy, which only pays out in the limited circumstances of a truly accidental death. Accidental death policies do not cover deaths from “natural” causes, which include illness, cancer, and other diseases. Furthermore, accidental death policies do not cover accidental deaths caused during the course of “risky activities,” such as sky diving, SCUBA diving, and private aviation travel or accidents that derive from “illegal activities,” such as drunk driving.
Even if your life insurance is not an accidental death policy, there are generally exclusions that the policy holder should be aware of. Most policies will exclude “dangerous or hazardous” activities from coverage, which include most of the risky activities listed above (and probably a few more).
While it is important for everyone to routinely review whether their existing life insurance policies cover their immediate needs, it is much more important to review before you engage in a dangerous endeavor or risky hobby so that you know whether such activity is covered under your policy.
The attorneys at PLDO can assist in determining whether your current policies cover your needs, can analyze planning options for existing policies that no longer meet your needs, and can facilitate communications with trusted insurance specialists on your behalf.
