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A term insurance plan is the best way to ensure the financial well-being of your family members in case of the unfortunate event of your death. These plans come with affordable premium rates and offer the nominee/beneficiary a death benefit in the form of a lump sum amount so that they can lead a life without hassle.
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However, some cases can lead to claim rejection. Therefore, if you have a term insurance plan or are planning to buy one, it is important to know what kind of deaths are not covered in a term insurance plan. In this article, we will discuss all the types of death that are not covered by term insurance in detail.
Term Plans
Let’s discuss what kind of deaths are not covered in a term insurance plan:
Death due to Suicide
Most life insurance companies in India do not cover death by suicide in the first year of term insurance policy. It is important to check the exclusions and inclusions of the death insurance policy through the plan’s brochure before purchasing a plan.
In case of death because of suicide within 12 months from the date of commencement of risk under the death insurance policy or term plan’s revival date, the beneficiary/nominee of the policyholder shall be eligible for at least 80% of the total basic premium paid by the policyholder till the death date or the surrender value available as on the date of death provided the policy is in force.
*The T&Cs of exclusion might vary from insurer to insurer. Refer company’s brochure.
Death due to Self-Inflicted Injuries
In case the life assured's death occurs due to self-inflicted injuries or hazardous activity, the term plan or death insurance policy claim made by the beneficiary will be rejected by the insurance company.
Death while Driving under Drugs/Alcohol Influence
The insurer rejects the claim if the policyholder's death is because of driving when drunk or under the influence of a substance. Term insurance plans are commonly not offered by insurers to drug users or heavy drinkers. The company would not give any death benefit if the policyholder failed to disclose all these habits while buying the term plan.
Death Due to Undeclared Pre-existing Diseases
If the life assured dies because of a pre-existing health condition they may have had before buying the term plan and did not disclose. In such cases, the insurance company has the right to reject the claim.
Death due to Participation in Illegal Activities
There are two possible scenarios in this case which are:
If the beneficiary/nominee is criminal: If the policyholder is murdered and later it is discovered that the nominee was also involved in the crime, the insurance company will not pay the claim amount. Until the nominee is proven guilty, the insurer will always reject giving the payment.
If the policyholder dies due to involvement in criminal activity: If the policyholder is killed because of his/her engagement in any illegal activity, the term insurer will not pay the claim amount. However, the nominee will receive the claim amount if the life assured has a criminal track record but dies because of a natural calamity like lightning, flu, or dengue.
Death due to Participation in Adventure Sports/Activities
Participation in adventure sports or activities is often excluded from coverage under standard Term Insurance policies. In the event of death resulting from engaging in such activities, the policy may not provide a death benefit to the nominees.
Death Due to Childbirth
Some insurers do not cover deaths due to pregnancy-related complications or during childbirth. Therefore it is suggested that you check in with your insurer and go through the policy documents to understand better what kind of deaths are not covered in a term insurance plan and if your specific insurer covers death due to childbirth or not.
Death due to Homicide
Term insurance doesn’t cover homicide under the following cases:
Case I: The Nominee is Responsible
If the nominee kills the policyholder, the insurer will reject the claim. No payout is made until the nominee is cleared of charges or acquitted.
Case II: The Policyholder was Involved in Criminal Activity
Term insurance does not cover deaths resulting from the policyholder's involvement in criminal activities.
Case III: The Policyholder’s Death is Caused by a Terrorist Attack
Many insurers do not cover deaths from terrorist attacks. Check with your insurance provider for specific policy details.
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Now that we have understood what kind of deaths are not covered in a term insurance plan, the other causes for a term insurance claim rejection are as follows:
Non-Disclosure or False Information:
Providing inaccurate personal details, such as age, profession, and health history, can lead to claim rejection. Verify policy documents for any discrepancies and inform the insurer promptly.
Lapse in Policy:
Failure to pay premiums results in policy lapses. If the policyholder dies during this period, no death benefit is paid out. Timely premium payments are crucial to ensure policy coverage.
Nominee Details:
Failing to appoint or update a nominee may complicate the claim process, requiring legal documentation. Keeping beneficiary details current ensures a smooth and swift claim settlement.
Undisclosed Medical Tests:
Insurance providers conduct medical tests, especially for higher age or risk coverage. Failure to submit these tests may lead to claim rejection, as the insurer may attribute the death to a pre-existing condition.
Policy Exclusions:
Insurance policies list specific exclusions, such as suicide or death under intoxication. Claims for deaths falling under these exclusions are not valid.
Hiding Other Insurance Policies:
Disclose existing life insurance plans, as they impact the sum assured eligibility. Failure to do so may limit the coverage amount and affect claim settlements.
Delay in Filing for Claim:
Promptly informing the insurer of the policyholder's death is crucial to avoid claim rejection. Delay in filing can lead to investigations into the cause of death, potentially complicating the process.
* You can use the term insurance premium calculator to find the plan that fits within your budget.
Now that we have taken a look at what kind of deaths are not covered in a term insurance plan let us see the types of deaths covered in term insurance plans:
Death because of natural causes or health-related problems
Term insurance plans cover natural death or death caused by health-related issues. If the policyholder dies due to any critical illness, medical conditions like heart attack, certain stages of cancer, kidney failure, natural calamities like floods, tsunamis, earthquakes, and other such acts of god, the policy's beneficiary will get the Sum Assured as the death benefit. However, it is always suggested that you check in with your insurer or insurance advisor to get a better understanding of the deaths covered and not covered in specific term plans.
Accidental Demise
Term plans also provide coverage in case the insured dies due to an accident such as a motor vehicle accident, fire injury, electric shock, drowning in a river, etc. Moreover, many best term insurance plans come with an additional accidental death benefit rider under which an extra sum assured is paid to the beneficiary of the policy along with the Basic Sum Assured in case of accidental demise of the insured person.
However, anyone who understands what is term insurance, knows that there are certain exceptions to this, such as involvement in any type of criminal activity, etc. Claims for this death insurance policy can be rejected if the accident is related to the below-mentioned cases:
Driving under the influence of alcohol or drugs
Participating in adventure sports like racing, skiing, mountaineering, or skydiving
Flying in an unlicensed or non-passenger aircraft
Involvement in strikes, riots, or arson
Engaging in criminal or illegal activities
Exposure to nuclear, biological, or chemical radiation
Deaths due to COVID-19
With the increasing pandemics worldwide, various death insurance policy seekers wonder whether a term insurance plan would involve coverage for the disease. Term plans offer coverage for death occurring because of COVID, provided an individual contracts the disease after buying the policy and not before.
*The T&Cs of exclusion might vary from insurer to insurer.
Before purchasing a term life plan, insurance buyers need to review the policy documents to get a better understanding of what kind of deaths are not covered in a term insurance plan. Proper knowledge of both the policy's inclusions and exclusions can help the policyholder avail the coverage and prevent any type of discrepancy during the claim processing.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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