Many life insurance buyers in India prefer buying a term plan over other life insurance products mainly because it is easy to understand and affordable. In the event of your untimely demise during the policy period, the insurance company pays the death benefit to the family in a lump sum.
Even though many experts suggest term insurance is the best life cover anyone can have, you must know how it works and its terms and conditions. You must know that term insurance too has specific limitations, and it does not cover all kinds of death; there are certain exceptions. This write-up discusses the types of death that are not covered by term insurance.
Natural catastrophes like floods and earthquakes can cause immense loss of life and property. And if your death occurs due to such calamities, the insurer can refuse the claim. You must be aware of the policy terms and conditions and update the beneficiary about the same. This will help them avoid filing a false claim in the future.
In the event of your unfortunate demise due to a terrorist attack or other terror activities like a bomb blast, the beneficiary cannot claim the term insurance benefits. Ensure that you read the terms and conditions carefully and be aware of the exclusions.
Undisclosed illness or lifestyle habit
When you purchase a term insurance policy, it is paramount that you disclose the details of your health condition in the application form. You must list down the details of your illness and any lifestyle habits such as smoking and alcohol consumption, which may have harmful effects on your health.
However, if you do not disclose such details, and if the insurance company finds out that your demise occurred due to such illness or lifestyle habit, the insurer has the right to reject the claim. Hence, it is vital that you honestly mention the details of your condition while you buy the policy.
Accident unless covered by a rider
Accidents can happen at any time, sometimes leading to fatal consequences. And generally, a term insurance policy does not cover death due to accidents. However, you can get coverage for such death by purchasing an additional rider like an accidental death rider. Unless you have such an add-on, your family will not get coverage against it, and their claim request will be rejected.
The insurance company will not honour the claim that your family members may file if your death occurs due to HIV/AIDS or any other sexually transmitted disease. This is because STDs and HIV are classified as permanent exclusion from term insurance cover.
Suicide and self-inflicted injuries
If you commit suicide during the first 12 months of the policy period, the beneficiary can receive about 80% of the premium paid. However, this condition is applicable only if the policy is non-linked.
If you have a linked plan and commit suicide within 12 months from the date of buying the policy, the beneficiary can get 100% of the premium you have paid.
However, if you commit suicide after one year or death occurs due to self-inflicted injuries, the insurer may pay the entire sum assured or a certain percentage of the death benefit as per the policy clause. However, some insurance companies do not provide coverage for suicide.
When you buy a term insurance policy, you must read the policy terms and conditions carefully before signing the policy papers. Having the right knowledge of inclusions and exclusions can help you and your family prevent discrepancies during a claim.