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Policy exclusions: war, aviation, and dangerous occupation

Why exclusions exist

A life insurance policy is a contract that promises to pay on the death of the insured. To keep that promise affordable, insurers reserve the right to not pay for a narrow list of causes that are either uninsurable, unpredictable, or priced separately. Those causes are called exclusions. Under the life insurance provisions of the Texas Insurance Code, the policy plus the attached application is the entire contract, so an exclusion is only enforceable if it is written into the policy or an attached rider that the owner receives (Tex. Ins. Code ch. 1101). Nothing an agent says at the kitchen table can add an exclusion, and nothing can hide one.

Three classic exclusions show up on the exam again and again: war or military service, aviation, and dangerous (hazardous) occupations or avocations.

A three-column chart titled Common Life Policy Exclusions, with a note that each exclusion must be printed in the policy or an attached rider. The left column is headed War and Military, status versus results. Its green Still Covered box reads: results clause, death from a cause unrelated to war, even while in uniform. Its red Excluded box reads: status clause, any death while on active duty in war or conflict, and the usual payout is a premium refund. The middle column is headed Aviation, who is at the controls. Its green Still Covered box reads: fare-paying passenger on a scheduled commercial flight. Its red Excluded box reads: pilot or crew member, student instruction, test or stunt flying, crop dusting, and military aviation. The right column is headed Dangerous Work, occupation or avocation. Its green Still Covered box reads: ordinary work and hobbies not named in the rider. Its red Excluded box reads: death arising from the named hazard, such as scuba diving, climbing, or racing. A band across the bottom lists the underwriter's three choices for a hazardous risk: exclusion rider, extra rated premium, or decline the application. Two closing lines state that the policy plus the attached application is the entire contract, so unwritten exclusions do not apply under Texas Insurance Code chapter 1101, and that an exclusion limits what is covered while contestability limits how long the insurer may attack the contract.
War, aviation, and hazardous-occupation exclusions: what stays covered, what is excluded, and the underwriter's options.

War and military service

War exclusions come in two flavors, and the difference is the whole question:

  • A status clause denies the claim if the insured simply has the status of an active-duty member of the military during a war or declared conflict, no matter how the death occurred. Death in a car wreck while on leave is still excluded.
  • A results clause denies the claim only if death actually results from an act of war or military conflict. Death from an unrelated illness while in uniform is paid.

A status clause is broader and therefore harsher for the insured. Either way, the usual remedy is a refund of premiums paid, sometimes with interest, rather than the face amount.

Aviation

Modern policies almost always cover the insured as a fare-paying passenger on a scheduled commercial flight. What may be excluded is the higher-risk flying: acting as pilot or crew member, student instruction, experimental or test flights, crop dusting, stunt or racing aviation, and military aviation. When an applicant flies personally, the underwriter has three tools: cover the risk with an aviation exclusion rider, charge an extra premium (rated policy), or decline the application.

Dangerous occupations and avocations

An occupation is how the insured earns a living; an avocation is a hobby such as scuba diving, rock climbing, or motorcycle racing. Hazardous ones are handled the same three ways: an exclusion rider limiting the benefit for death arising from that activity, a rated premium, or refusal to issue.

How exclusions differ from contestability

An exclusion is a permanent limit on what is covered. Contestability and misstatement provisions limit how long an insurer may attack the contract itself.

After the contestable period, an insurer generally cannot void the policy for a misstatement in the application, but a properly stated exclusion still applies to a death caused by the excluded hazard, because the loss was never inside the coverage grant (Tex. Ins. Code Title 7). Producers should therefore review exclusion riders at delivery and again whenever a client changes jobs, takes flying lessons, enlists, or picks up a risky hobby.

Sample questions

An insured is on active duty during a declared conflict and dies of a heart attack unrelated to combat. The policy's war clause denies the claim solely because the insured was a member of the armed forces at the time of death. Which type of war clause does this policy contain?

  • A results clause, because the insurer must trace the death to an act of war
  • An aviation clause, because military service is treated as flight risk
  • A status clause, because the insured's active-duty status alone triggers the exclusion
  • A contestability clause, because the death occurred during military service
Preview

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