Policy exclusions: war, aviation, and dangerous occupation…

What an exclusion does

An exclusion is a policy provision that removes a specific cause of death from coverage. If the insured dies from an excluded cause, the insurer does not pay the face amount. If the insured dies from any other cause, the policy pays exactly as written. Exclusions let an insurer accept an applicant whose ordinary risk is acceptable but who faces one unusual hazard, instead of declining the applicant outright or charging a higher premium for every cause of death.

Three classic exclusions appear in life insurance: war, aviation, and hazardous occupation or avocation. Exclusions must be written into the policy when it is issued; an insurer cannot add one later because the insured took up a risky job or hobby after the policy was in force.

War exclusions: status versus results

War clauses come in two forms, and the difference is heavily tested.

Status clause -- excludes death from any cause while the insured is in military service. A soldier killed in a car accident at home would not be covered. This is the broader, harsher form.
Results clause -- excludes death only when it results from war or an act of war. The same soldier killed in a car accident at home would be covered, because the death did not result from war.

New York's Insurance Law permits war exclusions only in a form tied to the cause of death. A policy may exclude death from war or an act of war while the insured is serving in the armed forces or an attached civilian unit (if death occurs within six months after that service ends), death from the special hazards of service while the insured is outside the home area (the fifty states, the District of Columbia, and Canada), and, within two years of issue, death from war of a civilian who is outside the home area. The law states expressly that these exclusions are not to be read as excluding anyone merely because of military status, and they do not reach diseases or accidents that are common to the civilian population and not attributable to the special hazards of service. Any war exclusion ends six months after the first of these events: the end of the war, the insured's separation from active military service, demobilization, or permanently leaving the war area.

When an exclusion applies, the policy typically pays a limited amount -- usually a refund of premiums paid, less dividends taken and any policy loan -- rather than the face amount.

Aviation exclusions

An aviation exclusion removes coverage for death resulting from aviation activity other than as a fare-paying passenger on a regularly scheduled commercial airline. It is aimed at private pilots, student pilots, crew members, military aviators, and people in specialized flying such as crop dusting or stunt flying. A person who simply flies on commercial airlines is fully covered. Instead of an exclusion, an insurer may cover a private pilot and charge an extra premium (a flat extra, a set dollar amount per $1,000 of coverage).

Hazardous occupations and avocations

Some jobs (commercial diver, explosives handler, test pilot) and hobbies (skydiving, auto racing, mountain climbing, scuba diving) carry risk far above average. The underwriter has three choices: decline the applicant, rate the policy with an extra premium, or issue it with an exclusion rider stating that death from that specific activity is not covered. Death from any other cause remains covered.

A decision path for a death claim. At the top is a box labeled Death claim filed. It branches to three tests side by side. The first is War: did the death result from war while the insured was serving in the armed forces or was outside the home area, or from a special hazard of service while serving outside the home area? The second is Aviation: did the death result from flying as a pilot or crew member rather than as a fare-paying passenger on a scheduled airline? The third is Hazardous activity: did the death result from the job or hobby named in an exclusion rider? If any answer is yes, the path leads to a red box labeled Excluded, where the policy pays only a limited refund rather than the face amount. If every answer is no, the path leads to a green box labeled Covered, where the full face amount is paid. A note at the bottom says a broader status clause would exclude any death while in military service, while a results clause looks only at the cause of death. — Exclusions test the cause of death, not the person

How exclusions interact with other provisions

Incontestability does not erase an exclusion. The two-year incontestable clause stops the insurer from voiding the policy for misstatements in the application. An exclusion is not a challenge to the policy's validity; it defines what the policy never covered, so it can be applied at any time.
Accidental death riders exclude more. The statutory limits on war exclusions do not apply to additional accidental death benefits, so double-indemnity riders commonly carry broader war, aviation, and hazardous-activity exclusions than the base policy.

Exam tip: a results clause asks how the insured died; a status clause asks only whether the insured was serving when death occurred.

Policy exclusions: war, aviation, and dangerous occupation