An applicant is a recreational private pilot. The insurer issues the policy with an aviation (hazardous avocation) exclusion. If the insured later dies in an aviation accident covered by the exclusion, the insurer will:

Why A is correct

When a policy is issued with a hazardous avocation exclusion and the insured later dies from the excluded activity, the death benefit is not payable for that cause of death. As a matter of fairness, the insurer generally refunds the premiums paid rather than keeping the money while no coverage is in force for the excluded risk. The exclusion narrows the risk the insurer agreed to assume at issue, and the premium refund avoids a complete forfeiture when death results from the excluded activity.

Why the other options are wrong

• B) The exclusion specifically removes coverage for the listed aviation activity, so the full death benefit is not payable for that cause. The return of premiums preserves fairness because the insurer never assumed the excluded aviation risk.
• C) Cash value belongs to the policyowner under the nonforfeiture provisions and is unrelated to the remedy for an excluded death. The exclusion removes the specified aviation risk from the coverage the insurer agreed to provide.
• D) No double payment arises from a hazardous avocation exclusion; disclosure simply allows the insurer to rate or exclude the risk. Cash value is the owner's equity under nonforfeiture provisions and is not the remedy for an excluded death.

Memory hook

Excluded hobby, excluded payout: premiums go back, benefit stays home. Disclose it, but the exclusion still bites.