Life Insurance Exclusion Riders: Are Military Personnel Covered?

Life insurance riders are provisions that allow the policyholder to add or restrict coverage. Riders can be added to policies that cover life, homes, autos, and rental units. While some riders are included at no additional cost, others require an extra premium charge. Life insurance companies offer a variety of riders, including the family benefit rider, accidental death and dismemberment, guaranteed insurability option, waiver of premium, conversion option, and long-term care option. Exclusionary riders, which restrict coverage for a specific event or condition, are typically found in individual health insurance policies. For instance, an exclusionary rider can be applied to restrict coverage for a pre-existing condition. Notably, exclusionary riders have not been permitted in any healthcare insurance since 2014.

What is a life insurance rider?

A life insurance rider is an optional add-on that allows you to customise your policy's coverage by adding or limiting benefits. Riders can add flexibility and benefits that your policy doesn't have by itself. For example, a rider may allow you to defer your premiums if you become disabled, or add more coverage later without a medical exam.

Riders are most often associated with permanent life insurance policies. They are additional benefits that can be bought and added to a basic life insurance policy. They allow you to customise a policy and can provide several kinds of protection if you meet their conditions.

• Guaranteed Insurability Rider: This rider allows you to purchase additional insurance coverage in the stated period without the need for a further medical examination.
• Accidental Death Rider: This rider pays out an additional amount of the death benefit if the insured dies as the result of an accident.
• Waiver of Premium Rider: This rider waives future premiums if the insured becomes permanently disabled or loses their income as a result of injury or illness prior to a specified age.
• Family Income Benefit Rider: In the case of the insured's death, this rider will provide a steady flow of income to family members.
• Accelerated Death Benefit Rider: This rider allows an insured person to use the death benefits if diagnosed with a terminal illness that will considerably shorten their lifespan.
• Long-Term Care Rider (LTCO): This rider provides an early payout of the death benefit if the insured meets the criteria for long-term care.
• Return of Premium Rider: Under this rider, you pay a marginal premium and at the end of the term, your premiums are returned to you in full.
• Term Conversion Rider: This rider allows you to convert a term life insurance policy into a permanent policy without having to prove evidence of insurability or take a medical exam.
• Disability Income Rider: With this rider, the insured can collect a regular income from the insurance company if they become disabled and are unable to work.
• Child Protection Rider: While the death of a child will not usually result in a loss of income for parents, it could still bring various financial hardships, such as funeral costs. With a child protection rider, benefits can be used for such needs.
• Critical Illness Rider: This rider will pay out a lump sum of cash if the insured is diagnosed with a qualifying critical illness.
• Accidental Death Benefit Rider: If the insured has this rider, the insurance policy will pay out an additional amount (over and above the standard policy death benefit) if they die as the result of a covered accident.
• Living Benefits/Living Needs Rider: This rider allows an insured person who is terminally ill to access a portion of the policy's death benefits to use for current needs.
• Inflation/Cost of Living Rider: This rider helps to increase the amount of the policy's death benefit, often based on the rise in the CPI (Consumer Price Index) on an annual basis.
• Long-Term Care Rider: This rider allows an insured person to access funds if they require long-term care, without having to purchase a separate, stand-alone long-term care insurance policy.

Riders can be included at no additional cost, or they may come with an additional premium charge. They can vary by policy and insurance carrier, and the cost of a rider (if there is one) can depend on criteria such as the age and health condition of the insured, and the type of policy.

Exclusion riders and their limitations

Exclusion riders can be added to insurance policies to restrict or limit coverage for a specific event or condition. They are usually added to life, home, auto, and rental insurance policies, and they come at an additional cost.

For example, an exclusion rider may be added to an insurance policy to restrict coverage for pre-existing conditions, as is common in individual health insurance policies. Exclusionary riders have been prohibited from being applied to children's policies since September 2010, and they have not been permitted in any healthcare insurance since 2014.

In the context of life insurance, exclusion riders may be applied to restrict coverage for causes of death such as suicide, acts of war, aviation accidents, criminal activities, and specific hobbies like skydiving or rock climbing. These exclusions are listed in the policy at the time of application, and they vary by state and insurance company.

It is important to note that exclusion riders are not the same as clauses in an insurance policy. While an exclusion rider typically protects the insurance carrier by allowing them to deny coverage for a specific reason, a clause may provide protections for the policyholder. For example, an incontestability clause limits the insurer's ability to deny a claim, and a grace period clause allows for some flexibility in premium payment due dates.

When considering the addition of an exclusion rider to an insurance policy, it is essential to weigh the cost and benefits carefully. It may be more advantageous to purchase a separate policy instead of adding a rider, as a standalone policy typically offers more coverage. Additionally, it is crucial to ensure that the rider does not duplicate coverage already included in the basic policy.

War exclusion clauses

Following the September 11, 2001 terrorist attacks, war exclusion clauses were expanded to include "war and terrorism." This broadened the scope of the exclusion beyond contractually assumed liability, and these exclusions now apply regardless of whether terrorism is insured or excluded in the policy.

Life insurance policies may also include accidental death and dismemberment riders, which provide additional benefits in the event of accidental death. However, acts of war are typically not covered under these riders, and it is important to carefully read the provisions to understand what is considered an "accident."

While war exclusion clauses are standard, companies and individuals in high-risk areas, such as politically unstable countries, may be able to purchase separate war risk insurance policies to cover damages and losses caused by war.

Life insurance exclusions

Life insurance policies can be customised to meet the needs of the policyholder through the use of riders, which are provisions that add benefits to or amend the terms of a basic insurance policy. Riders can provide additional coverage options or restrict coverage. They come at an extra cost, but this is usually low because they involve minimal underwriting.

There are many different types of life insurance riders, including:

• Term conversion riders, which allow the policyholder to convert a term life insurance policy into a permanent policy without having to provide evidence of insurability or take a medical exam.
• Disability income riders, which provide a regular income from the insurance company if the insured becomes disabled and is unable to work.
• Waiver of premium riders, which waive the policy's premium payments if the insured becomes disabled and is unable to work.
• Guaranteed insurability riders, which allow the policyholder to purchase additional life insurance coverage in the future without having to undergo a medical examination or provide evidence of insurability.
• Accelerated death benefit riders, which allow the policyholder to obtain some or all of the policy's death benefit if they become terminally ill and are expected to live for a short period, typically a year or less.
• Child protection riders, which provide benefits to cover expenses in the case of a child's death.
• Return of premium riders, which are offered by some term life insurance policies and refund the insured all the premiums they have paid if they live to the end of the policy's term.
• Critical illness riders, which pay a lump sum to the insured if they are diagnosed with a critical illness such as cancer, kidney failure, or stroke.
• Accidental death benefit riders, which pay out an additional amount over the standard policy death benefit if the insured dies as the result of a covered accident.
• Living benefits/living needs riders, which allow the insured to access a portion of the policy's death benefits if they are terminally ill.
• Inflation/cost of living riders, which increase the amount of the policy's death benefit, typically based on the rise in the Consumer Price Index (CPI) on an annual basis.
• Long-term care riders, which allow the insured to access funds from their life insurance policy if they require long-term care.

Life insurance policies also contain exclusions, which are situations or circumstances that prevent beneficiaries from receiving the death benefit. Exclusions are included to protect insurance companies from fraud and excessive risk. Common life insurance exclusions include death caused by:

• Suicide, usually within a certain timeframe (typically two years) of purchasing the policy.
• Acts of war, unless the policy is designed specifically for service members.
• Aviation accidents.
• Criminal activities.
• Specific hobbies that are considered dangerous, such as skydiving, SCUBA diving, and rock climbing.

Life insurance for military personnel

Life insurance is a necessity for most families, and military personnel are no exception. In fact, due to the unique circumstances and risks associated with military service, it is especially important for those in the military to have adequate life insurance coverage. While some people may assume that military members are automatically covered by government-provided insurance, this is not always the case. Military personnel and their families need to carefully consider their life insurance options and choose a policy that best suits their needs.

Options for Military Life Insurance

One option for military life insurance is the Servicemembers' Group Life Insurance (SGLI) program, offered by the Department of Veterans Affairs (VA) and underwritten by Prudential, one of the largest life insurers in the US. SGLI provides coverage for active-duty members of the Army, Air Force, Navy, Marines, Space Force, and Coast Guard, as well as for certain members of the U.S. Public Health Service and the National Oceanic and Atmospheric Administration. The recently passed Supporting Families of the Fallen Act increased the maximum coverage amount from $400,000 to $500,000, with service members able to choose their coverage amount in $50,000 increments. SGLI also includes the Servicemembers' Group Life Insurance Traumatic Injury Protection (TSGLI) benefit, which provides additional coverage for certain losses during active duty, such as blindness or amputation, for a flat rate of $1 per month.

Another option for military life insurance is to purchase a policy from a private insurer. USAA, one of the nation's largest insurers, offers various life insurance options for military members, veterans, and their families, including term life, simplified whole life, and universal life policies. American Armed Forces Mutual Aid Association (AAFMAA) also offers a broad selection of life insurance policies for active-duty military members, veterans, and their spouses, with coverage options tailored to their specific needs.

Important Considerations for Military Personnel

When choosing a life insurance policy, military personnel should consider several factors. Firstly, it is important to understand the terms and limitations of each policy, including any exclusions or riders that may apply. For example, some policies may not cover acts of war or risky activities, which could be relevant for military personnel. Additionally, it is important to consider the cost of the policy, as some VA-backed policies can become significantly more expensive after leaving active duty.

Customizing Your Policy with Riders

Life insurance riders are additional options that can be added to a policy to customize it according to your specific needs. For example, a Term Conversion Rider allows you to convert a term life insurance policy into a permanent policy, ensuring coverage for the remainder of your life. A Waiver of Premium Rider waives the policy premium if you become disabled and unable to work, while an Accelerated Death Benefit Rider allows you to access a portion of the policy's death benefit if you become terminally ill. Other riders, such as the Family Benefit Rider, provide coverage for your immediate family members. It is important to carefully consider which riders are most relevant to your situation and to understand any additional costs associated with them.

In conclusion, life insurance is a crucial consideration for military personnel and their families. By understanding the options available, including government-provided programs and private insurance policies, military members can make informed decisions about their coverage. Additionally, by utilizing riders, they can customize their policies to ensure adequate protection for themselves and their loved ones.

Frequently asked questions