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Life Insurance Exclusions & Clauses Explained

August 09, 2023
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While the primary goal of life insurance is to offer financial protection for your loved ones, it is crucial to understand that there are some circumstances in which the insurance company will not pay the death benefit.

These specific circumstances outlined in the policy documents are known as “policy exclusions and clauses.” Some are for your protection as the owner, and some are for the insurance company’s protection.

Here we will cover the life insurance exclusions and clauses you should be aware of. Just because it is listed here doesn’t necessarily mean it’s included in your specific policy, so be sure to review yours carefully.

Life Insurance Exclusions that Protect the Company

Policy exclusions are essential components of life insurance contracts, acting as safeguards for insurance companies against potential fraud, and high-risk activities.

They ensure that insurers can continue to offer affordable premiums to the majority of policyholders by mitigating the potential for excessive claims or misuse.

Entire Contract Clause

A life insurance policy is a legal, binding contract. The application is included as part of the contract and if the policyowner made false statements on their application, the life insurance company the right to terminate the contract.

Misstatement of Age Clause

This clause states that if the policyowner lied about their age on their application, the insurance company has the right to:

  • Increase premiums
  • Adjust the policy amount
  • Terminate the policy entirely.

Suicide Clause

This states that the insurance company has the right to not pay out on a policy if the insured dies by suicide within a specified period, typically within two years from the start of coverage. The company will return all paid premiums to the family, though.

Avocation Exclusion

If you participate in a risky hobby or occupation, some insurance companies will offer you coverage if the policy includes an avocation exclusion instead of declining your application altogether.

This means that the insurance company would pay a death benefit if you died by any means except for a death related to that specific activity.

Common avocation exclusions include:

  • Aviation
  • Mountain climbing
  • Scuba diving

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Life Insurance Clauses that Protect the Policyholder

It’s critical to understand the exclusions in your policy. Doing so ensures you know what’s covered and what isn’t, preventing unpleasant surprises for beneficiaries later on.

Reinstatement Clause

This clause is a little 50/50. It protects both you and the insurance company.

In the event that the policy is terminated because of nonpayment, the policyowner may reinstate their policy by paying all past premiums plus interest.

However, proof of continued insurability, such as going through another medical exam, may be required.

Free Look Period

While not technically a “clause”, a policyowner can return theirs within a certain period if they are not satisfied with the policy’s terms and conditions. The policyowner will then be fully refunded.

Grace Period Clause

Each policy has a grace period, a certain amount of time typically 31 days, in which a policy will still remain active even if the premium is not paid.

If the grace period ends and there is still not payment made, the policy will be terminated.

If the insured dies during the grace period, the death benefit will still be paid but the premium owed may be deducted.

Incontestability Clause

The insurance company has a specific amount of time, typically two years, to dispute the validity of statements made on an application.

If they discovers falsehoods on the application, they can terminate the policy.

After this period is over, they can no longer challenge statements made on the application and must pay out in the event of the insured’s death.

Beneficiary Clause

This simply allows the policyowner to name the recipients of the death benefit.

Survivorship Clause

This states that the policyowner can elect to postpone the death benefit payout to their beneficiary.

For example, the policyowner can state “My spouse is my primary beneficiary, but I want to make sure she is survives at least 30 days after I die before she receives the death benefit payout.”

Spendthrift Clause

This protects beneficiaries from having the death benefit payout be confiscated by creditors.

The spendthrift clause does not apply to lump-sum settlements, and the policy owner must elect a settlement option before his or her death.

Compare Term Life Insurance Quotes & Apply Today

If you own a life insurance policy and haven’t taken the time to carefully look through the details, now is a good time.

Even if you’ve read through the details, review your policy occasionally so you don’t forget any important details, ensure your coverage is adequate, and check that your beneficiaries are correct.

If you are looking to purchase life insurance, start by getting a free, anonymous term life insurance quote today. Quotacy’s friendly agents are happy to review any questions you may have on certain clauses or life insurance in general.

Watch the Life Insurance Policy Clauses and Exclusions Video


  1. Marlene

    Why do you have to disclose your credit card number or debit card? Is this legal?

    • Natasha Cornelius

      You are not required to disclose your payment information until after you’re approved for coverage. You accept the insurance company’s offer and then set up payment.

  2. Dave Green

    Are there every exclusionary clauses to do with participation in experimental medical proceedures or participating in experimental drug trials?

    • Natasha Cornelius

      Experimenting in clinical trials should not affect the life insurance you already have. However, your medical history is evaluated when buying life insurance.

  3. Kesha

    Nice job


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