Which of the following causes of death is most likely to be excluded or restricted under a life insurance policy?

Why A is correct

Life insurance policies commonly exclude or restrict death resulting from illegal activities, particularly the commission of a felony, because such conduct presents both a moral hazard and a public policy problem. Ordinary deaths from illness, natural causes, and even accidents are the risks the policy is designed to cover and are not excluded. The exclusion discourages the purchase of insurance to profit from criminal activity and keeps the insured risk within the expectations on which the premium was based. By excluding felony-related deaths, the policy prevents an insured from profiting from criminal conduct.

Why the other options are wrong

• B) A heart attack is a standard insured cause of death and is not excluded under a life insurance policy. Such conduct presents a moral hazard that insurers are not willing to insure against.
• C) Cancer is one of the most common insured causes of death and is fully covered by life insurance. Heart disease is a leading cause of insured death and is fully covered by ordinary life policies.
• D) Accidental death is covered under the basic life policy; no exclusion applies to ordinary automobile accidents. Cancer claims are among the most common reasons death benefits are paid under life insurance.

Memory hook

Felonies are out, heart attacks and crashes are in. Illegal conduct is the one the policy refuses to fund.

Why A is correct

Life policies commonly exclude death resulting from the insured's participation in illegal activity, such as committing a felony. When the exclusion applies, the insurer denies the claim or limits coverage, because public policy holds that insurance should not reward crime and the risk was not one the insurer priced. This differs from suicide, where during the contestable period the insurer refunds premiums rather than paying the face amount. Paying regardless, double indemnity, or a paid-up conversion would all contradict the purpose of the exclusion.

Why the other options are wrong

• B) The illegal-activity exclusion permits the insurer to deny coverage when the insured dies committing a felony. Payment is not automatic when the exclusion applies.
• C) Double payments arise under accidental death benefit riders, which pay an additional amount for accidental death. They have nothing to do with illegal-activity claims.
• D) A paid-up conversion is a nonforfeiture or policy feature unrelated to the circumstances of death. The illegal-activity exclusion, if it applies, denies or limits the claim.

Memory hook

Break the law and the policy breaks cover — crime is not an insurable hobby.