What are life insurance exclusions?

An exclusion is a specific condition or circumstance that is not covered by your insurance policy.

An insurer may place an exclusion on your policy when you apply for Life, Total and Permanent Disability (TPD), Income Protection, or Critical Illness. 

Example - Brenda 
Brenda had an issue with her back last year and needed to attend physio to rectify. She is now applying for Life and TPD insurance. Her insurer has placed a spinal exclusion on your TPD insurance, meaning she will not be able to claim the cover if she re-injures her back. If the spinal injury is discovered to be unrelated to the initial injury, she may still be able to claim, depending on her insurers Product Disclosure Statement (PDS).

However, if she injures her ankle, she may be entitled to her TPD cover as the mechanism of injury does not have an exclusion against it. 

​Why do insurers put exclusions on policies?
You can think of an exclusion as insurance for the insurer; they do not want to provide cover when they know it’s likely to be claimed on. This is to prevent people from taking out large amounts of cover for pre-existing conditions and then immediately claiming on them.

What if I don’t disclose my pre-existing conditions during my application? 
It is advisable to disclose any diagnosed conditions or investigations during your application to prevent issues down the line. 

When a claim is initiated the insurer will complete a through investigation into your medical history (not to mention the investigation that will occur prior to your policy being accepted) to discern if your condition was present prior to the policy start date.

If you fail to disclose a recorded medical condition, your future claims may be denied, your cover cancelled or amended, and you will have paid your premiums for no material benefit. 

If you have questions about what needs to be disclosed on your application, we recommend contacting your financial adviser. 

Do exclusions only apply to injuries and illnesses?
You may receive exclusions for more than just injuries or illness.

For example, Josh is a mountain biker. Although he’s in good health, his hobby is dangerous and performed regularly, increasing the likelihood of him needing to claim on his insurance.

Instead of declining Josh, they offer him a lifestyle exclusion. He can make a claim for anything under the relevant PDS, except for any injury or illness occurring as a result of mountain biking.

So, a broken leg due to falling over at home? Likely claimable. A broken leg due to falling off his bike? Not likely to be claimable.
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Other exclusions may be due to:

• Family History
• Occupation
• Hobbies
• Travel/Lifestyle

Physical Injury/Illness Exclusions
When an insurance policy contains an exclusion for a pre-existing condition, but a new injury mechanism occurs, the claim's success depends on proving that the new, distinct event caused the damage, rather than a mere recurrence of the old issue. Insurers often decline claims based on exclusions, but legally they must be able to prove a direct connection between the excluded event and the new loss.

Mental Health Exclusions
This is an ambiguous issue. While the same mechanism of injury argument applies, since mental health is such a new area of science, insurers may use broad, blanket exclusions that "indirectly" relate to a mental health history to deny claims.

Exclusions on Partial Cover
Sometimes you may need to increase your sum insured due to a change in lifestyle, employment, or debt position. In this case you may apply for additional insurance, only for an exclusion to be applied.

In most cases these exclusions will only be applied to the increased portion and will not impact your entire cover amount. This means that if you were to injure your ankle, but your top-up cover had an ankle exclusion, you would only be eligible to the original cover amount, not the combined sum insured.

Exclusion Review
Different exclusions have different periods of review. Some can be removed if you don’t experience symptoms for a particular period of time, while others cannot be reviewed with that insurer and will remain on the cover for the duration of the policy.