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Life Insurance Exclusions

(credit: Ben Bowens)

(credit: Ben Bowens)

By Amy E. Feldman

PHILADELPHIA (CBS) - You buy life insurance to ensure the financial security of your loved ones but you need to understand what isn’t covered.

What goes up in Vegas plunges down in Vegas. A 75-year-old grandma and the skydiving instructor dressed as Elvis to whom she was tethered – Ok, pause for a minute to picture – died when the parachute failed to open. And while she doesn’t seem like the type of cautious planner who would have bought life insurance, if she did, this would likely be excluded.

“Exclusion” is a statement in an insurance policy that tells you types of losses that are not covered by the policy. In life insurance, a common exclusion is for death caused by “terrorism,” “act of war” or “while in active military service”. Another very common exclusion is for fraud or misrepresentation – say, forgetting to mention the terminal condition with which you’ve been diagnosed or that you’re 92 instead of 29. And suicide occurring less than two years from the date the policy was bought is also a common exclusion.

There can be other exclusions – like engaging in abnormally stupid activities. So, take a look at the policy lest your loved ones find themselves all shook up.