What Kinds of Death Are Not Covered Under Term Insurance?

What Kinds of Death Are Not Covered Under Term Insurance?

Almost every other individual these days has become smart to secure their family’s protection by adopting term life insurance policy. As the term life insurance is a part of your investment & financial planning, you need to take care of many aspects before buying one.  The term insurance aims to secure the policyholders as well as their family in case of any unforeseen situations or events.

Therefore, term insurance is considered the most sought after financial tools among people. However, it’s important to understand that although, term insurance is generally meant to cover the death of the policyholder; there are certain kinds of deaths that are not covered under the term insurance.

Here’s a look into the types of death not covered under term insurance:

Does Term Insurance Offer Accidental Benefit?

In general, term insurance offers death benefit which is meant to be received by the insurance nominee in case of accidental death of the policyholder.

Here’s an illustration of the scenario.

Suppose, a pure term plan offers the sum assured of Rs 50 lakhs. The policyholder further adds any additional assured amount of Rupees 20 lakhs, his nominee would get a total of Rs 50 lakhs + Rs 20 lakhs in case the policyholder dies of an accident during the policy term. However, if the death does not happen due to the accident, his nominee will only receive Rs 50 lakhs in spite of having added the accidental rider to the policy.

What Kind of Death is not Covered in Term Insurance?

Generally, the term insurance offers the death benefit for all types of death. However, there are some restrictions for certain kinds of death.

  • A term plan does not cover suicidal death if the policyholder commits suicide within one year of starting his term insurance or within one year of revival of the plan.

However, in some cases, if the policyholder commits suicide within one year of commencement of the policy, there are some insurance providers that pay partial or total premium paid by the policyholder, to his nominee.

Possible Scenarios Under Term Insurance

Before selling a term plan for an insurance seeker, the insurance companies also have to follow certain rules and regulations. The insurer has to check the overall health condition, lifestyle habits, ag, etc. to make a decision about the payable premium for the customers.

Again, if there is no change in the health status of the consumer, the premium amount for them remains constant throughout the tenure of their plan. However, the claims may get rejected if the customer hides any information regarding his health condition.

If the policyholder dies within two years of commencement of the term of his policy, his case will fall under Section 45 of the Insurance Act. But the early claim of death will be strictly scrutinized keeping in mind the following aspects

  • Wrong statement
  • Improper disclosure
  • Or any fraudulent activities

Following are the major conditions that can come under the scrutiny of the insurance company:

  • If any policyholder is engaged in any dangerous sports such as paragliding, water rafting motor racing, etc., he or she needs to declare the pros and cons of the sports he is engaged into while buying the policy. If anyone fails to declare it, it will be considered as material misrepresentation and death due to taking part in such dangerous sports will not be covered under term insurance.
  • Similarly, it’s important for the individuals who smoke to make a declaration about the same. The smoker category comes under a higher level of health risk. If a smoker fails to declare her or his smoking habit while purchasing the policy, it may lead to the denial of his claim at the time when he will actually need it.
  • However, if the policyholder develops the habits of drinking or smoking after purchasing the policy, it won’t come under material representation. In addition to that, if any disease appears after issuing the policy, the policyholder will not fall under a fraudulent A similar case is with dangerous sports and profession too.

Homicide: If the policyholder is murdered by the nominee, again, the insurance company has the right to reject the claim.

Tsunami: If the policyholder dies due to tsunami or other natural phenomenon or disasters, the insurance company will not take his death into consideration unless the policyholder has opted for an additional rider for the reason.

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All in all, it is highly recommended by the experts to go through your policy document and understand the terms & conditions of the term plan you are going to buy. Alongside, it’s equally important to educate your nominee on the exclusions & inclusions of your term policy, so they can have hassle-free claim experience.