【Term Life Insurance Comparison】Annual premiums are not substantial, but why are exclusions particularly minimal?

When purchasing insurance, many people worry about disputes that could affect claims, or even result in paying premiums without receiving compensation. However, disputes over life insurance are relatively rare, as exclusions are minimal. For instance, in the case of suicide, coverage is typically provided after a certain period. In contrast, general insurance policies often come with lengthy lists of exclusions that can be overwhelming and confusing. What lies behind such differences? 10Life is here to explain it all for you. 

General insurance policies typically outline the covered items, allowing policyholders to claim compensation for losses due to specific reasons. However, it is important to note the exclusions ("excepted liabilities"). For instance, in the case of comprehensive car insurance (also known as full coverage), the scope of coverage generally includes compensation for injuries or deaths of others caused by a traffic accident, as well as medical expenses incurred by the driver or passengers due to such an accident. However, if the accident results from the driver operating without a valid licence, or if the insured driver is under the influence of alcohol or drugs, these scenarios fall under exclusions.

One critical consideration for exclusions is to prevent policyholders from deliberately causing incidents to claim compensation. In general insurance, the policyholder and the beneficiary are often the same person. As mentioned earlier, driving without a licence or under the influence, besides being illegal, could potentially allow the insured to stage an incident to fraudulently obtain compensation. 

Compared to general insurance, life insurance places little emphasis on the insured risk (cause of death), and there are fewer exclusions. Therefore, the cause of death usually has minimal impact on life insurance claims.

Even in cases of suicide by the policyholder, most insurance companies nowadays will pay out compensation for suicides occurring after the first or second year of the life insurance policy's effective date, allowing beneficiaries to receive the payout. This is by no means an encouragement of suicide; the original intent is to "provide protection for dependents, rather than benefiting the insured life itself." (Note 1) If insurance companies were to deny claims due to the insured's suicide, it would effectively punish the vulnerable who have lost both their loved one and financial support, which is clearly unfair.

However, to mitigate the moral hazard of an insured person committing suicide shortly after purchasing a policy to obtain compensation, most insurance companies include a suicide clause in their policies. This clause typically lists suicide within the first or second year of the life insurance policy's effective date as an exclusion. In fact, when determining premiums, insurance companies have already taken into account the likelihood of various causes of death for the insured, including suicide.

As stated in the Study Notes for Long Term Insurance Examination compiled by the Insurance Authority: "In life insurance, unless the suicide exclusion clause or accidental death benefit rider applies, the cause of death is not of great significance." (Note 2)

By the end of 2020, 10Life found that most term life insurance products in the market cover death resulting from AIDS, illegal activities, drug overdose, war, and suicide (after one to two years from the policy effective date).

If you would like to learn more about term life insurance, you can refer to other articles on 10Life or visit 10Life’s Insurance Decoder for more information.

Further Reading: 
Term Life Insurance Comparison 2025: How to Choose the Coverage Period? 
Is the Coverage Enough? Term Life VS Whole Life: How to Choose? 

Note:
1. The sentence is quoted from the 《Long-Term Insurance Examination Study Notes Handbook》 (2017 Edition, including updates from August 2018 and August 2019) Chapter 4.12.
2. The sentence is quoted from the 《Long-Term Insurance Examination Study Notes Handbook》 (2017 Edition, including updates from August 2018 and August 2019) Chapter 1.2.3(a)(i).
3. This article is compiled by 10Life based on market information gathered from various sources. It is for general reference only and does not take into account any individual needs or suitability. It should not be considered as sales advice. Before purchasing insurance, you should discuss with a licensed insurance advisor to determine a suitable insurance plan for yourself, and refer to the information provided by the insurance company.
4. The premium information above is updated as of 11th July 2025 and does not include the premium levy collected by the Insurance Authority.
5. Last updated date of this article: 11th July 2025

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.