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Extreme Sports That Make Life Insurers Freak Out

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Tuesday, July 14, 2015

Extreme Sports That Make Life Insurers Freak Out

What you call an adrenaline rush, insurers call a "hazardous avocation." Whether you're scaling 14,000-foot peaks, bombing black diamonds, or swimming with the sharks, your high-stakes hobby will jack up the cost of your life insurance policy.

Sure, you're more likely to die in a car crash than a rock climbing accident. But driving is something almost everyone does. Scaling cliffs isn't. For life insurance companies, you're a liability when you take big risks.

If you're an adrenaline junkie or a weekend warrior, be prepared to pay more than your average couch potato on your life insurance policy.

Which activities do insurers consider "extreme"?

Think of extreme activities as adventures that Joe Schmoe wouldn't do in his free time. Here's a list of sports that most life insurers consider to be high risk:

  • Mountaineering
  • Trekking, bouldering, or rappelling over 10,000 feet
  • Rock climbing
  • Scuba diving
  • Whitewater rafting
  • Car, motorcycle, or powerboat racing
  • Parasailing
  • Bungee jumping
  • Skiing or snowboarding
  • Surfing
  • Wakeboarding
  • Jet skiing
  • Skydiving
  • Aviation
  • Caving
  • Competitive boxing, wrestling, or martial arts
  • Hunting

Are all extreme sports considered equal?

Nope. Life insurance companies determine rate increases for extreme sports on a case-by-base basis. They'll probably want to know very specific details about your hobby, including:

  • How often you've gone in the last year
  • Where you've gone
  • The highest, deepest, or fastest you've gone
  • If you've had past accidents
  • If you have professional training
  • If you use a partner or team
  • If you wear protective gear

Say you head out for weekend scuba trips, and your buddy likes to explore deep sea wrecks. You might have to pay extra on your life policy, but your friend will pay much more.

How much extra will I pay for an extreme sport?

Typically, insurers will tack on $2 to $10 for each $1,000 of your policy. So, let's say you want a $500,000 term life policy. Here's what you could pay in extra premiums per year, based on your choice of "hazardous vocations."

  • Motorcycle riding: $1,000 per year

  • Scuba diving: $2,500 per year

  • Mountain climbing: $1,750 to $2,500 per year

  • Hang gliding: $2,000 per year

  • Rock climbing: $1,500 per year

  • Hunting: $500 per year

  • Recreational boating/fishing: $750 per year

Which activities could insurers refuse to cover?

Some sports are just too risky for insurers. If you get your adrenaline fix from one of these dangerous hobbies, expect to pay much more, or possibly even be denied a life insurance policy:

  • Ice climbing
  • Free climbing
  • Rock climbing above 14,000 feet
  • Mountaineering outside the U.S.
  • BASE jumping
  • Cliff diving
  • Big wave surfing
  • Helicopter skiing
  • Competitive skiing, surfing, or snow/wakeboarding
  • Motocross or motorcycle racing
  • Street luging
  • Free running
  • Scuba diving below 150 feet

If your very extreme sport makes you ineligible for life insurance, some insurers might still cover you. However, they may impose one major exclusion: If you die while participating in that high-risk sport, you'll lose the death benefit.

What if I don't tell my insurer about my extreme activities?

Failing to disclose this information to your insurer can be just as dicey as swimming with the sharks. Keep in mind that life insurance is for your loved ones, not you. If you don't reveal your risky business on the insurance application, your insurer can cancel the payout when your time comes.

There are two reasons for this:

  1. You're guilty of "material misrepresentation." If you die during the first two years of your policy, your insurer has the right to investigate your cause of death. If they find out you withheld information (like the fact that you climb in Nepal every year), they can deny your claim — even if your cause of death isn't directly related to mountaineering abroad.

  2. You're guilty of fraud. If you lie about something that would have made you ineligible for a policy, your insurer can revoke your payout. In some states, your claim can even be revoked after the first two years of your policy.

The bottom line: It's better to tell the truth about your hobbies, so you don't risk losing your benefits when you die.

What if I start a sport after I buy a policy?

You'll still be covered. What's important to your insurer is what you've been doing up to the time you're approved for a policy. If you pick up a sport after your policy starts, you typically won't lose your benefits.

Cover what's most valuable to you

Unless you're the next Evel Knievel, your extreme sport will probably be covered. Just be prepared to fork over extra cash for a life insurance policy.

Before you start the search for a policy, get in touch with an expert. An experienced agent can help you shop around for the best rates, and figure out how to answer those tricky application questions.

You may make reckless decisions on your high-stakes adventures, but you definitely don't want to take chances on your life insurance plan.