What is life insurance. Life Insurance Exclusions and Loadings: Top 10 Reasons Revealed

Often a life insurance exclusion will be offered concerning non-medical conditions. For example, a client who participates in motor racing may be given the choice of excluding that activity from the cover. Top 10 life insurance companies.

Fortunately, in many cases, you can request that your insurer review your policy exclusions after 12 months from starting your policy.

The purpose of life insurance exclusions

The goal of insurance exclusions or limitations is so that the insurer can protect themselves against risks so significant that it's beyond their risk appetite or in cases where the data isn't available to calculate a loading to compensate for the risk. For example, if you are an avid skydiver, rather than denying you a life insurance policy, the insurer may decide to apply a skydiving exclusion.

How are term life insurance exclusions decided?

A term life insurance exclusion is generally determined by the information you've provided during application time. This might include information about your age gender, occupation, hobbies, and whether you're a smoker or not. Your insurer reviews this information using their specific guidelines, and then determines whether there are any risks they are not willing to provide cover for.

Top 10 most common reasons for life insurance exclusions and loadings include:

Suicide and self-harm

A claim related to suicide, and self-inflicted injuries will generally be excluded within 13 months of your policy commencing. Some insurers go so far as to exclude suicide up to two years. Once this period is complete, the exclusion is reassessed and usually lifted, depending on the insurer's guidelines and policies.

Drug and alcohol abuse

Some insurers would not pay a benefit if the insured person's death were due to alcohol or drug misuse.

Criminal activity

If a claim is the result of illegal activity, war or terrorism your life insurer might not pay out.

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Your medical history

Your policy could exclude or limit coverage for specific medical conditions which you had before applying for life insurance; these are typically referred to as pre-existing medical conditions.1. Examples of health problems that could have a 12-month-waiting period attached include certain cancers, diabetes, high blood pressure and dementia.

Your BMI

If you have a higher than average Body Mass Index (BMI), your weight might classify as a pre-existing condition, and you could expect either an exclusion or premium loading for obese-related illnesses, such as a heart attack, sleep apnea and stroke.

Dangerous occupation

If you work in a high-risk profession, for example, in construction, or your job opens you up to specific hazards, like car accidents for taxi drivers, your policy may have an exclusion for claims related to these occupational risks.

Travelling to high-risk destinations

Insurers may exclude coverage when you travel to countries the government has advised are unsafe to visit.

Gross recklessness and negligence

This exclusion usually refers to things like driving dangerously or not taking proper safety precautions.

Hazardous hobbies

Some extreme sports and activities are considered particularly dangerous and may be excluded, such as bungee jumping, mountain climbing, and skydiving. However, select insurers do provide coverage for dangerous past-times by opting to apply a premium loading.

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Generally, insurance companies will pay a benefit if injury or death is because of a commercial plane crash. However, if the individual dies as a passenger in a private plane then some companies will not pay.

Yes. All underwriters should be prepared to review exclusions and loadings. If you have returned to a standard risk as a result of medical treatment, or after having ceased a hazardous occupation or pastime, favourable consideration should be given to removing the exclusion.

Generally, the insurer will want to see a period of time where you have been entirely free of symptoms and be satisfied that the condition has stabilised to the extent that the original decision can be modified.

In the case of non-medical exclusions, the life insurance company will need to be convinced that you have permanently ceased the activity, and there is no likelihood of them taking it up again.

In some circumstances, it may be difficult to come to this conclusion because of various factors. But whatever the situation, the insurer should work with you to position the reasoning for the decision so that the policy is not at risk of being cancelled (e.g. by agreeing to defer the decision until certain criteria are met).

In some extreme circumstances, an exclusion is a not a suitable option for the insurance company to offer, and the cover must be deferred or declined outright.

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This is often because the wording for an exclusion must be well defined, as it may form the basis for the assessment of a future claim against the policy. Accordingly, the offering of an exclusion is limited to situations where a medical (or occupational/pastime) condition can be unambiguously isolated and identified.

For example, exclusions are particularly useful for musculoskeletal conditions (such as a knee injury). But they're less efficient for systemic medical conditions such as severe diabetes, where a claimable complication could include blindness, kidney problems or peripheral vascular disease.

Life insurance companies in Australia usually try to avoid deferring or declining an application, leaving it as a last resort. Every effort is made by Australian insurers to try and offer non-standard risk cover with a loading or exclusion wherever possible.

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