A life insurance policy is a contract between a policyholder and an insurance company. The contract, one in which is in the exchange for a premium paid by the policyholder, the insurance company provides payment known as a death benefit to beneficiaries of the policyholder upon the death of the policyholder. There are two major types of life insurance – term and whole life insurance. Term life insurance pays death benefits to the beneficiaries only if death occurs during the term of the policy. It expires after a certain number of years. On the other hand, a whole life insurance policy pays the death benefit whenever the policyholder dies.
A life insurance policy is a binding contract. For it to be enforceable, the policyholder must give full disclosure of past and present health conditions and high-risk activities. A lot of companies offer policyholders the opportunity to customize and negotiate their policies to accommodate their needs. Each policy is specific to the policyholder and the insurer. Some accommodate unique needs such as chronic health conditions and high-risk lifestyles.
Types of deaths covered by life insurance policies
Life insurance plans are made to provide coverage for the beneficiaries of the policyholder upon the death of the policyholder. However, not all types of death are covered by the policy. This means that when a policyholder dies as a result of a cause that was not stated and agreed upon in the policy, the beneficiaries of the death benefits will not be paid the death benefits. There are certain types of deaths that are covered by life insurance policies. They include:
Natural death caused by health-related issues
Where there is a natural death of the policyholder caused by health issues and pre-existing health conditions disclosed and covered under the policy, the insurance company will pay the death benefit to the beneficiary.
Policies provide coverage in cases of deaths resulting from accidents. Additional coverage is made available for people with high-risk jobs such as race car drivers.
Types of death not covered by life insurance policies
Suicide is a common circumstance in which a life insurance policy will not pay out the death benefit to the beneficiaries. Depending on the policy, there might be a clause that prevents the beneficiaries from getting death benefits. For some, the beneficiary will get just the premium and for others, nothing at all depending on the timeframe and the jurisdiction
Where the policyholder dies as a result of self-inflicted injuries, the insurers will not pay the death benefit. Also, if the policy holder’s death is a result of driving under the influence of alcohol or any other narcotic substance, the insurance company will not pay the death benefit.
Sexually transmitted diseases
Insurance companies will not accept to pay the benefit where the death of a policyholder is as a result of a sexually transmitted disease like HIV or AIDS.
Homicide by the beneficiary
Where it is the case that the beneficiary murders the policyholder to get the health benefit, the insurance company will not pay as this act amounts to fraud.
Fraud can be committed on a life insurance policy where the policyholder fails to disclose the existence of any health condition. Insurance companies always investigate the cause of death. Where they find that you failed to disclose certain illnesses or dangerous activities, they can refuse to pay the death benefit.
Where the policyholder dies while committing an illegal activity or a crime, the beneficiary will not be paid.
Death caused by hazardous activities
Where the policyholder dies as a result of participating in adventurous activities not covered in the policy, the insurance provider is not obligated to pay the death benefit.
Whether Corona virus-related deaths are covered by life insurance
The spread of Covid-19 / Coronavirus caused the death of thousands of people all over the world. Thus the question arises as to whether the life insurance policy covers the death of policyholders resulting from Coronavirus.
Where a policyholder dies as a result of Covid-19 or Coronavirus, the beneficiary will get the benefit. It is a death caused by health-related issues and deaths resulting from health-related issues are generally covered under a life insurance policy. Life insurance policies do not specifically exclude deaths from infectious diseases. As long as the policyholder was honest in the application about travel and pre-existing conditions, the beneficiary will be paid the death benefit.
There are however exceptions to this. There are certain instances where the beneficiary will not be paid. The first is where the policyholder submitted inaccurate information or an incomplete application. Where this happens, a company can refuse to pay the death benefit to the beneficiary on the death of the policyholder. Honesty is very important when filing insurance applications.
The second is where the policyholder failed to pay the insurance premiums. Premium is the amount of money a policyholder pays to the insurer periodically for the coverage. Where a policyholder fails to pay a premium, the policy lapses and the beneficiary under the policy will not receive the benefit when the policyholder dies.
The third exception is where the policyholder purchased an accidental death policy. This kind of policy is designed to cover accidents. It does not cover deaths resulting from illness or any health condition. Thus, it does not and cannot cover any death as a result of Covid-19 / Coronavirus.
As a rule, upon the death of a policyholder, the life insurance provider pays the death benefits to the beneficiary. This rule is however dependent on whether the policyholder meets the basic requirements as stated above. Deaths resulting from Coronavirus are deaths resulting from health-related issues even if it is an infectious illness. Thus, deaths related to coronavirus are covered under life insurance policies.
If you’re exploring health insurance or looking for alternative healthcare plans, Life Insurance, or supplemental insurance plans feel free to reach out to our professional agents and see what program or programs might be right for you, that can help you through this time. Call Vivna, Inc. today to learn more here: 866.793.2301