Myth #18: Act of War, War Exclusion Clauses with Life Insurance

There is a myth out there that life insurance companies may not pay out a death benefit in the event a soldier dies in the line of duty in the event of war.

I cannot speak for every insurance company or insurance contract, but that is not the purpose of the Act of War clauses for insurance companies to reserve the right to not pay out a death benefit.

I'd like you to think about this from an insurance industry perspective.

Let's assume that a terrorist attack happens on American soil again, but this time, the death toll is 100 times that of 9/11. That would be 300,000 unpredicted and unplanned mortality experiences that would throw the actuarial tables completely off for many, many years.

The insurance industry could not cover such a devastation. It would sink the insurance industry.

The insurance industry bases its pricing and reserves on mortality tables and actuaries calculate the pricing of covering the otherwise planned and anticipated mortality experience. Acts of war are, generally, unpredicted and unplanned, at least by the insurance industry.

Not to downplay the events and death toll of 9/11, but it was only 3,000. That was barely a blip that would easily be covered by the insurance industry of those who were covered. In fact, because of the nature of that attack and the devastation, the insurance industry waived the requirement of a death certificate before claims would otherwise be paid out. The ACLI or American Council of Life Insurers created this video to help ease the concerns of insured families.

https://www.youtube.com/watch?v=OM1dC1qhdV8

Investopedia expounds further on this in their article here citing that it's about keeping the insurance industry solvent. https://www.investopedia.com/terms/w/war-exclusion-clause.asp