Why do life insurance policies have aviation exclusions?

Q:

Why do life insurance policies have aviation exclusions?

A:

First, let's talk a little bit about how aviation exclusions work in a life insurance context. It works in different ways depending on your specific policy and insurer but it only relates to private aircraft, not commercial flights. Some insurers mandate that an aviation exclusion is added to your policy based on age or experience to ensure that expert or professional pilots (who are a low insurance risk) are still covered, albeit for additional premium. There are sometimes also limits on the total number of hours flown, exclusions for acts of war or type of aircraft, among other things. Your particular policy's wording will have the final say in these matters (to better understand the wording, see The Key Elements of an Insurance Contract or consult our Insurance Dictionary).

This exclusion does not necessarily mean that you are not allowed to fly or be a passenger on a plane; it just means that if you die or are seriously injured in an aviation related incident, the life insurance contract will not pay out. Nowadays, because aviation is safer, in normal situations, they will just cover you for an additional premium. Aviation riders are also available from some insurers although they are hardly ever used (the former option is much more common).

Now on to the reason why aviation exclusions exist: insurance policies will exclude things that the insurer considers high-risk activities—especially activities that most other insureds will not be participating in (find out more in A Look at Uninsurable Risk). Insurance contracts work by pooling risk, so if insurers were to allow coverage for risky but rare activities into the pool, the other insureds will need to bear that additional cost in their premiums. In order to keep rates affordable, they, instead, choose to apply these exclusions (see How an Insurance Company Decides to Insure You to learn more).

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About the Author: (Director of Education at PNC Learning)

Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.

In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.

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