Life insurance is a great way to provide financial support to loved ones after you pass away. Young adults commonly use it to cover income lapses due to death. Seniors use it to cover funeral costs and other end-of-life expenses. If the policyholder dies due to most causes, payouts are unaffected, but what disqualifies life insurance payouts?
We’ve got you covered with the major reasons why life insurance payouts can be disqualified and how to avoid them. Final Expense Benefits is a trusted brokerage that works with over 20 of the top life insurance providers. We’ll help you find the most affordable policy with the best coverage.
To learn more, call us at (866) 786-0725 Monday through Friday, 9 a.m. to 5 p.m. ET, or check our free online quoting tool for a no-pressure, 24/7 pricing estimate.
Key takeaways
Insurers may not pay policy claims because of several conditions.
The most common reason for insurers to not pay a claim is a lapse in coverage. If the policy is canceled or ends because of a failure to pay premiums, no benefit is paid.
Most insurers have a two to three-year contestability period in which they can deny claims due to suspicious circumstances. Insurers use this time to investigate the policyholder’s death and ensure no fraud or crimes occurred.
Benefits may be paid in cases of suicide, as long as the policyholder died outside of the contestability period, though guidelines vary by insurer.
What Disqualifies Life Insurance Payouts?
Life insurance payouts can be disqualified if the policyholder’s application is suspicious or fraudulent, or if their death meets several conditions. Common disqualifying conditions for life insurance include:
1
Policy Lapse
The most common reason why life insurance benefits aren’t paid is also the simplest one: the policy lapses. Whole life policies typically lapse because of failure to pay premiums, while term life plans always end after a set period.
Regardless of how the policy lapses, if an active policy lapses (or is cancelled by the insurer or policyholder), no payment will be issued. Each insurer has different rules regarding plan lapses, and some allow for limited payouts, depending on the policy type.
2
Fraud
Life insurance applications often ask specific health and lifestyle questions. These questions are intended to accurately assess applicants’ health profiles and determine how risky they are to insure. The riskier the client, the higher the premium rate.
If an applicant lies or intentionally leaves out information about their occupation, lifestyle, or health status, insurers can cancel the policy prematurely or withhold payouts. This can happen while a policy is active and the policyholder is alive or after the policyholder dies and a claim has been issued by a beneficiary.
Insurers suspecting fraud on applications will use the policy’s two-year contestability period to review the deceased policyholder’s lifestyle. If they find that the policyholder lied on their application or otherwise left out important information, they may not pay anything.
The easiest way to avoid this issue is by working with a licensed life insurance agent. Applications can be complicated, and you may unintentionally miss important information.
Final Expense Benefits agents have years of experience in the life insurance market and can help make sure your application is accurate and easy to submit. Contact us to learn more.
3
Risky Hobbies
It’s important to disclose any risky hobbies on applications. Recreational activities like hunting, scuba diving, automobile racing, and mountain climbing have high chances of death and are relevant to life insurance. If you die while partaking in one of these activities but don’t disclose this information, your insurer may cancel the payout.
Many insurers require a life insurance rider at an extra cost to allow payouts for policyholders with risky hobbies.
For example, many providers offer a recreational pilot rider and other specialized riders for those with dangerous hobbies. It’s important to disclose any of these hobbies to ensure a smooth payout process for your beneficiaries.
4
Suicide
Contrary to popular belief, death by suicide is often covered by insurers, but only after a policy’s suicide clause period. Like the contestability period, the suicide clause usually lasts for two to three years. This is intended to prevent policyholders from taking their own lives immediately after their policy starts.
No life insurance payout is worth taking your own life. Any payment to your loved ones can’t replace your presence in their lives. If you are struggling with mental health issues, resources like the 988 helpline are available.
5
Murder
If the policyholder is murdered, payments often proceed as normal, unless the primary beneficiary committed the crime. This life insurance guideline is called the slayer rule. It’s intended to prevent beneficiaries from planning to kill the policyholder for a quick payout.
6
Drug or Alcohol Abuse
Death caused by drug or alcohol abuse is normally covered by insurers. However, if the policyholder dies due to these types of abuse, insurers may use the contestability period to investigate.
If they find that the policyholder lied or withheld information about drug and alcohol use on their application, they could deny the claim. This is another reason why it’s important to be thorough, clear, and accurate in your application.
Assistance from licensed life insurance agents from Final Expense Benefits can ensure your application is properly submitted. Call us for help or to learn more.
7
Death by Illegal Activity
If the policyholder dies from an illegal activity, the insurer will likely use the contestability period to investigate. Death from a convicted felony likely will cancel a payout, but if the contestability period ends, insurers may not be able to do so.
Insurers have their own guidelines on how to deal with these rare cases.
8
War or Terrorism
If the policyholder dies due to an act of war or terrorism, some insurers may refuse to pay benefits, but this is rare. Members of the military may not be able to purchase a life insurance policy, but this depends on rank and deployment status.
As with most of these rare exceptions, insurers’ guidelines may vary. If you are a member of the military, we can help steer you towards a policy with no payout issues.
9
No Beneficiaries
If your policy has no specified beneficiaries or you outlive them, the insurer won’t know where to pay the benefit. It will instead be paid to your estate and be put through probate court, a lengthy process that may take years.
This is why it’s important to ensure your beneficiaries are properly specified on your policy, to keep your beneficiaries up to date, and to list secondaries to receive the payout if the primary can’t be paid.
Ensure your policy is properly submitted and all your beneficiaries are covered by applying with the assistance of a licensed life insurance agent. If you don’t have anyone to pay, benefits can be paid to a charity.
When Does Life Insurance Pay?
Most life insurance payout exceptions are rare. The majority of valid claims have smooth payout processes, paying benefits shortly after the policyholder’s death. Here are some of the causes of death life insurance covers:
- Death by natural causes
This includes death by “old age”, death from diseases like cancer, dementia, or terminal illness, and more. If you have a modified policy and die within the waiting period, benefits may be reduced or paid in installments.
- Accidental death
If the policyholder dies in an accident, such as a car crash, not only are there few issues with payouts, but many insurers provide larger death benefits from accidental death riders.
- Suicide after two years
Once the suicide clause ends, if the policyholder dies from suicide, payouts typically have no issues.
- Murder
If the policyholder is murdered by anyone but the beneficiary, payouts usually proceed as normal, regardless if their death is legally ruled as manslaughter or homicide.
Life insurance payouts are reliable in most cases. With diverse policies that can address the needs of young adults, workers, seniors, and even children, life insurance is a great investment in protecting your family’s future.
What Can Life Insurance Cover?
Life insurance covers a few different uses that mostly depend on the age of the applicant. Younger adults who are still working normally use higher-value plans like term life insurance to cover loss of income due to death.
Seniors typically use life insurance to cover funeral, cremation, or burial plot costs, and other end-of-life expenses, though payouts can be used for anything the beneficiary desires.
Term life is available for seniors, but medical underwriting guidelines may prevent them from qualifying, while whole life insurance is often unavailable or unaffordable for younger applicants. Eligibility, life insurance uses, and costs depend on your age and health.
Also called final expense insurance, burial insurance is a great choice for seniors. Here’s more information about burial policies:
Burial Insurance: The Best Choice for Seniors
Burial insurance is a type of whole life insurance made for seniors. Benefits include benefits that are tailored to their needs, affordable rates locked for life, lifelong coverage, cash value growth, and payouts that will never decrease. Average burial insurance payouts range from around $5,000 to $50,000, plenty to cover end-of-life costs.
Because burial insurance health requirements and underwriting are relaxed, seniors can secure affordable, accessible coverage. Though burial insurance is available to seniors in their 70s and 80s, waiting to apply can increase your rates. Apply early and enjoy lower premiums ranging from around $30 to $150.
Burial insurance health requirements are designed to accept seniors with pre-existing conditions, often with no waiting period. Guaranteed life insurance is available to nursing home-bound seniors or those with serious health concerns.
Below are sample premium rates from some of our top providers for a benchmark $10,000 burial insurance policy. The sample applicants don’t smoke and have no specific pre-existing conditions:
| Company |
Male 50y/o |
Female 50y/o |
Male 60y/o |
Female 60y/o |
Male 70y/o |
Female 70y/o |
|---|---|---|---|---|---|---|
|
$34 |
$27 |
$50 |
$40 |
$70 |
$56 |
|
|
$31 |
$26 |
$43 |
$35 |
$71 |
$53 |
|
|
$31 |
$24 |
$44 |
$33 |
$75 |
$53 |
|
|
$34 |
$29 |
$45 |
$35 |
$79 |
$59 |
|
|
$33 |
$26 |
$48 |
$36 |
$82 |
$58 |
These figures are estimates only, based on a $10,000 final expense insurance policy with no applicant pre-existing conditions.
If you’re interested in burial insurance, call us at (866) 786-0725 to learn more, or check our free online quoting tool for a pricing estimate. Our funeral cost calculator can help you determine how much coverage you need.
Final Thoughts
In most cases, life insurance is a reliable, affordable way to provide extra financial security and peace of mind to loved ones. What disqualifies life insurance payouts? Only a few rare conditions.
The most common disqualifying conditions for life insurance include policy lapses and fraud. Avoid any payout issues by using our assistance to find an affordable policy and accurately complete applications. As a licensed life insurance brokerage, Final Expense Benefits agents thoroughly understand life insurance and can help you get great coverage.
To get started, call us at (866) 786-0725 Monday through Friday, 9 a.m. to 6 p.m. ET, or check our free online quoting tool.
FAQ
When will life insurance not pay?
Life insurance benefits are paid if the policyholder dies from most causes, though policy lapses and fraud are the most common reasons why benefits aren’t paid.
Does life insurance pay out if you commit suicide?
Most policies have a two or three-year contestability period at their start in which benefits are not paid if the policyholder commits suicide. However, once the contestability period ends, benefits may be paid.
What is burial insurance?
Burial insurance is a low-cost type of whole life insurance designed to offer seniors accessible, affordable coverage. Average benefit payouts range from around $5,000 to $50,000 and are typically used to pay funeral, cremation, and burial plot costs and other end-of-life expenses.
How much does a funeral cost?
In 2025, average funeral costs in the U.S. are around $10,000, which is why most sample burial insurance quotes are for $10,000 policies. Check our free funeral cost calculator to see how much coverage you need.