Tennessee Insurance Practice Exam

If a policyholder with a war exclusion clause dies in a non-war-related incident, what benefit does the beneficiary receive?

1. Partial payment of the policy

2. Nothing, due to the exclusion

3. The full face amount of the policy

4. A waiver of premiums

The correct answer is: The full face amount of the policy

When a policyholder has a war exclusion clause in their insurance policy, this clause specifically pertains to coverage related to incidents or claims arising from war activities. If the policyholder dies in a non-war-related incident, the terms of the war exclusion are not applicable. As a result, the beneficiary is entitled to receive the full face amount of the policy. This means that the death benefit is triggered in situations where the cause of death is unrelated to war or recognized war-like activities. Therefore, the presence of the war exclusion clause does not affect the payout when the death occurs from other causes. The insurer is obligated to fulfill the terms of the policy for incidents not covered by exclusions, ensuring that the beneficiary receives the full benefit. This principle reinforces the importance of reading policy terms carefully, as exclusions define the specific scenarios where coverage may not apply, but they don’t negate the benefits for other situations.