Insurance

What Kinds Of Death Are Not Covered Under Term Insurance?

Insurance Claims

Published on June 17th, 2019

For any individual, his most important concern is that his family is taken care of even when he is not alive. It is this concern which led to the progression of insurance and nowadays almost everyone gets one to keep themselves secured for any future exigencies.

Term insurance is the most sought after insurance policy type and rightly so. Its features and benefits are multiple due to which the preference arises. However, it also has some drawbacks and does not cover a few types of death when it comes to releasing money for claim purposes. Let us have a look at what kinds of death would not be covered under term insurance.

1. Accidental Death Benefits

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Yes, in case of term insurance, the nominee of the person receives the death benefit even if the person has had an accidental death.

Let us consider the case of Andy

Andy has got a term insurance policy with a sum assured of Rs 60 lakhs, and he also has an accidental death rider worth Rs 15 lakhs associated with it.

Andy dies in an accident. What amount his family is going to get after this sudden and unexpected death of Andy?
His nominee is going to receive Rs 60+15 =75 lakhs from the insurance company. Had Andy died of any illness, his nominee would have got only Rs 60 lakhs sum assured.

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2. Which Death Does Not Get Covered In Term Insurance

Mostly the death benefit that term insurance provides coverage for any type of death. However, if the person commits suicide within one year of the start of the policy, he would not get the death benefit.

Apart from that, if he has just renewed the policy and within one year he commits suicide he would not get the benefit either.

But there are many service providers who in this situation also give the nominee a part of the total benefit as compensation.

3. Other Scenarios Under Term Insurance

When the insurance company sells a term insurance plan, it has to adhere to certain regulations. They check the health, lifestyle and other important factors related to the person before taking a final decision. If there has not been any major change in the health of the person, his premium may remain the same throughout.

In case the policyholder passes away within two years of commencement of policy, this case comes under section 45 of Insurance Act. However, the company may investigate whether the policyholder had made a wrong statement, wrong disclosures, or had hidden something. The company will investigate what causes the sudden death.

Following are the three situations where the Insurance Company might analyze the case a little extra carefully:

  • If the policyholder is someone who indulges in adventure sports like paragliding, water rafting, etc. then he needs to inform the insurance company in advance at the time of taking the policy. In case the person has not disclosed and his death happens because of the same reason the claim request may be declined.
  • Also, if a person is an avid smoker, he needs to mention that when he is seeking a term insurance policy. The smoker becomes prone to high health risks and he can be susceptible to any kind of future ailment. If later, a claim is made or he discloses his health status the company can very well choose to say no to him.
  • If the person develops smoking or drinking habit after the policy has been signed then that cannot be considered a fraudulent case. So, if he gets a terminal disease during the policy period, the company cannot deny paying the claim amount to his nominee. A similar situation applies to a person who has started practicing adventure sports after the policy has already been signed up.

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4. Homicide

Again if the policyholder gets killed by his or her nominee in that situation the insurance company may again think of canceling the claim made.

5. Natural Disaster

Natural Disaster

If a death is caused by any natural disaster like tsunami, earthquake, etc. the insurance company would not be making the claim settlement. However, if the policyholder has already bought a rider for this issue than the company is bound to pay.

Conclusion

Whenever you buy a new term insurance policy, it is crucial that you understand the whole document at length. This is to avoid any kind of misunderstanding that may come later. Also, discuss your policy in detail with your nominee, so that he or she is aware of the procedure that he has to follow when the settlement time comes.