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Buying a term insurance plan is a hassle-free process. Once you purchase the plan, you must pay regular premiums to your insurer to keep the cover active until maturity. However, a waiting period is applicable for terminal or critical illnesses after its purchase. It can range from a few days to a year or more.
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The beneficiary can claim the policy if the policyholder’s death has occurred after the waiting period is over. You can know the details of the waiting period from your insurer during the buying process.
Purchasing term life insurance is the wisest decision you will make. It not only offers death benefits but also has rider benefits to enhance the protection.
Below are the key features of life insurance policies that policyholders must consider:
Waiting periods are common practice in health insurance. After you purchase insurance, there will be a waiting period wherein you can not claim any policy benefits. The duration differs from insurer to insurer, but the usual waiting period is 30 days to 180 days. During this period, if anything happens to you, your insurer won't cover it. That is not the case with life term insurance plans. It is one of the best features of a life term insurance plan. No waiting period means that your life term insurance plan will cover you from the moment you purchase the policy.
Just like home loans, an insurance policy is also a huge financial commitment for a longer period. However, it also has certain tax benefits added to it. Policyholders can claim up to Rs 1.5 lakhs per annum as a tax deductions benefit under section 80 of the IT Act. Besides, the returns a policyholder yields from the policy are completely tax-free.
Premiums are the obligatory payments policyholders have to pay to the insurance companies or the insurer. Premiums depend upon the age of the policyholder, insurance amount, and the term duration. Flexibility is offered in choosing premium payment frequency that best suits the policy buyers requirements or affordability. You can choose premium payment frequency from monthly, quarterly, annually, or bi-annually. Some insurance companies also allow lump sum premium payments. You can calculate the premiums you need to pay using the term insurance calculator for the desired life cover.
Most life term insurance plans exclude the following eventualities from their plan:
In case of accidental death, insurance companies investigate it with the help of healthcare professionals before processing the claim. Most life term insurance plans do not cover suicide if committed within one year from the policy's date of purchase.
If a policyholder is killed by culpable homicide, the insurer will refrain from paying until police complete all the formalities and get the reports from the police. If the beneficiary or the nominee commits homicide, the insurer is not liable to make any payment.
While selling the insurance policy, insurance companies tend to take everything into account. They primarily focus on the lifestyle of the policyholder. This is an important step to analyze if a certain lifestyle causes untimely death. For example, most insurers put smoking habits under an unhealthy lifestyle. Hence, death due to smoking is excluded from insurance coverage if policyholders fail to mention that in their policy application.
If a policyholder likes adventure sports or leads a very reckless life, then death caused by such events is excluded from the policy coverage. Some insurance companies return the premium payments to the beneficiary in case of untimely death due to the factors mentioned above by deducting all the expenses they paid in examining the cause of death.
Narcotics and alcohol-consuming policyholders are considered as the high-risk category. Therefore, death caused by substance abuse or excessive drinking is not covered under a life term insurance plan.
If a policyholder fails to mention sexually transmitted diseases or STDs or even contract it after purchasing the policy, it will not be covered under the life term insurance plan.
Life term insurance plan usually covers chronic or terminal illness under their insurance cover. However, when it comes to health issues, insurers want policyholders to declare their conditions before purchasing a policy. Not doing so can lead to the policy not providing any coverage.
*Note: It is very crucial that you first understand the terminal illness meaning and then add the rider to your base plan.
Insurance companies do not cover the policyholder's death if it is caused by active participation in criminal or illegal activities. If a policyholder dies in protest, then the insurer is not liable to pay.
Most term life insurance plans do not cover if the policyholder dies during childbirth or its complications after birth. Period of death is not considered if medical complications arise after giving birth. Most insurers are also not liable to pay for the death of the infant if it was covered in the policy.
Most insurance policies don't give protection if death is caused by the Act of God. It includes death caused by natural calamities, such as earthquakes, tsunami, flooding, and other natural disasters.
Almost term life insurance plans cover the policyholder’s death since the day the policy comes into force. However, certain policies do not come into effect immediately. The waiting period of such companies can go from a few days to 2 years. It happens only in rare cases that waiting periods are extended up to 4 years.
You can understand what is term insurance waiting period by taking a look at the following provisions in term insurance::
In the case of chronic illness, the insurer does not make a payout if the policyholder passes away in a waiting period. If the chronic or terminal illness is diagnosed during the waiting period or within 90 days of the issuance date, the policyholder or beneficiary can raise a claim for the treatment.
If the policyholder dies in the waiting period before making any premium payment, the insurer is not liable to pay any compensation.
Suppose the policyholder dies in a waiting period. In that case, the beneficiary can claim the amount paid in form of premiums from the date of application until the last premium paid or the time of death, whichever is the first.
The waiting or cooling period refers to the period between the purchase of the policy and the time when the policy starts giving out benefits. Term life insurance plans do not usually have a waiting period. However, some term life insurance policies add certain clauses that do not immediately provide coverage for terminal and critical illnesses.
It is always advised to read terms and conditions before making any purchase to ensure that you fully know when your policy will provide coverage and how much time you have to wait to get the benefits.
†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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