Mission impossible: Extreme sports that could knock you out of contention for life insurance
Broken collarbones and legs, paralysis, blindness — even death — are potential results for those who indulge in extreme sports. While most of us are acutely aware of our mortality and try not to push the envelope, some of us seek out activities for the adrenaline rush it brings. We looked for the most popular extreme sports that could put your life insurance application in a free fall.
The insurance industry calls these "hazardous avocations," explains Kim McKeown, spokesperson for the Society of Actuaries (SOA). "If an insurer learns that a new client’s hobby is jumping out of airplanes or body boarding down a Class V rapid, there is a strong potential for raising your rates or deciding not to cover you altogether."
Wave goodbye to good rates
Jack Dewald, chair of the Life and Health Insurance Foundation for Education, a nonprofit, says that a person is most likely to be declined when their sport becomes too extreme.
"Scuba diving in depths over 200 feet could get you declined, since this is extremely risky. Also, if a student pilot just took up flying, more than likely he or she will be declined as well," he says. "Most other activities like big game hunting, flying an ultra light aircraft, or skydiving would add $2 to $10 per $1,000 in coverage in extra surcharges for a life insurance policy. It really depends on how risky the sport is."
However, once you have secured a life insurance policy, your life insurer can’t raise your rates until renewal time and they can’t cancel your policy after the "contestability period," which is generally two years. During the contestability period, your insurer has the right to cancel your policy if it finds out you neglected to mention a dangerous hobby when you applied.
If you start your dangerous sport after you have a secured a policy, your life insurer cannot cancel you because you did not misrepresent anything when you applied.
"If they had the policy for a year and they take up skydiving and kill themselves, the company still has to pay," says Kevin Coughlin, an impaired-risk specialist with Target Insurance Services, Inc. in Overland Park, Kan.
Playing it safe
Dewald recommends being honest with your life insurance company about your extreme sports hobby, and be prepared to pay a higher premium.
"Typically insurers use an Informal Inquiry Form [UC 0401P] for people who might fall under the category of impaired risk or if there is a question regarding insurability on other risks that are not standard," he says.
Dewald adds the most common reason life insurers deny a death claim is because of "material misrepresentation" on an insurance application.
"You don’t want to get into a situation where there is a potential for a denied claim based on an omission that was found on the special questionnaire," Dewald says. "If you die in an extreme sport accident, the people who are going to be hurt the most are your loved ones. It’s not a risk you should take."
If your employer provides a group life policy, no one in the group can be excluded because of an extreme sport.
Get the best rates, without giving up your sport
1. Get serious about your sport. Take safety-training and certification courses. Training from a credible professional company may reduce your life insurance rate. Also, purchase highly-rated safety equipment and tell your insurer; this also helps lower your premium.
2. Limit how often you engage in your extreme sport and let your insurer know you do it on a limited basis.
3. If you don’t want to pay an extra surcharge for your high-risk life insurance, work out a deal with your insurer where you will be covered for any fatal event except your extreme sport.
4. Shop around for insurance and see who covers your activity and provides the best deal.
Want more ways to get insurance? Read 8 ways to find life insurance when you’re "uninsurable."
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