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  • Types of Deaths not Covered Under a Term Insurance Plan

    Life Insurance
    • Premiums as low as Rs.17/day for sum assured of Rs.1 crore*
    • Claim up to Rs. 1,50,000 deduction under section 80C**
    • Choose between annual and monthly premium payment options

    Term insurance plans are pure insurance covers taken for the sole purpose of securing the future financial needs of a family after the primary earner’s unexpected demise. While there is no denying that term insurance is the best protection one can have against his/her life, not all types of deaths are covered by term insurance plans. All major life insurance companies provide detailed information about what is not covered in their policies. All policyholders must be aware of these exclusions just to make sure their dependents don’t face any issues with claims in the future. Before we focus on the specific exclusions of term plans, let’s take a look at the features of term insurance policies.

    Features of term insurance policies

    A term insurance policy provides coverage against the death of the policyholder within the policy term. It covers both accidental deaths and natural deaths occurring within the policy period. Following the unexpected death of the policyholder within the policy term, the lump sum amount mentioned in the policy schedule will be paid to the nominee or legal heir. Typically, the primary earners of a family take term plans to secure their family’s finances in case of their untimely death. Policyholders can also enhance their coverage with the help of add-on policies or riders.

    Types not covered by term covers

    The following types of deaths are not covered by term insurance plans:

    • Accidental death under the influence of alcohol: Term plans provide coverage for accidental deaths. However, if the policyholder was found to be driving under the influence of alcohol, there will not be any compensation to the beneficiaries. This applies even if the policyholder is not responsible for causing the accident.
    • Death caused by pre-existing illnesses: If the death of the policyholder occurs due to a pre-existing illness, it will not be covered by a term plan. While signing up for a policy, an applicant must declare all pre-existing illnesses. Insurers often investigate the untimely death of policyholders. If the death claim is related to a pre-existing illness not declared by the policyholder, it might also constitute insurance fraud.
    • Death due to participation in adventure sports: Life insurers discourage policyholders from participating in adventure sports and hazardous activities. If the death of the policyholder is caused due to participation in motor sports, water sports, skiing, paragliding, skydiving, scuba diving, etc., the insurer has the right to reject compensation for the claim.
    • Death due to participation in illegal activities: If the death of the policyholder arises out of participation in illegal activities, the company may reject the claim. An illegal activity refers to any criminal offense that involves breaking the rule of law.
    • Death due to drug abuse or overdose: Life insurance does not provide coverage for death arising out of drug abuse or overdose. Claims arising out of any kind of drug or alcohol related death will not be entertained by life insurance companies. At the time of subscribing to a policy, the company typically asks applicants whether they have used drugs in the past. The premiums are determined based on the answers provided by applicants.
    • Suicide: A major exclusion outlined by all life insurance companies is suicide. Most life insurance companies do not provide coverage for suicide during the first 12 months of the policy. This may also differ from insurer to insurer. Any specific condition related to suicide clause can be found in the policy document issued at the time of signing up.
    • Homicide: Life insurance companies provide coverage for homicide in cases where the perpetrator is an unknown assailant. However, if the main beneficiary is somehow involved in the homicide of the insured, the company has the right to reject the claim. In this case, the innocence of the nominee must be proved in the court of law.

    Conclusion

    Listed here are some of the key exclusions applicable to life insurance. Before you sign up for a policy, it is better to check out these exclusions and get an understanding of what is not covered by your insurer. While death is extremely unpredictable, you can safeguard yourself from these exclusions by limiting your exposure to hazardous situations given in the list.

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