What kind of deaths are not covered in term insurance?

A term insurance plan is one of the mainstays of any healthy financial portfolio. A term plan or term insurance policy is a pure protection tool that offers financial protection to the policyholder's family members in case of an unfortunate eventuality. With a term plan, you pay an affordable fixed amount as an annual premium in exchange for life coverage.

When it comes to securing the financial future of your family members in your absence, a term insurance plan is a proven and trusted financial product. In case of the policyholder's untimely demise during the tenure of the term plan, a substantial death benefit is paid to the beneficiaries either as a lump sum or in instalments.

The goal behind getting a term insurance policy is to ensure that your family's financial needs and dreams are fulfilled even in your absence. While grieving the loss of a loved one, the last thing your family needs is a claim denial based on a fundamental condition like the cause of death.

What's covered and what isn’t

Before you purchase any financial product, including a term plan, you must have all the relevant information about it. This includes reading the fine print of terms and conditions of the term plan to avoid any unpleasant revelations later on. For the term plan to do what it is designed to do, certain caveats need to be met. One of these criteria is the cause of death of the insured person.

Due to natural causes

Death occurring due to natural causes such as old age is covered under a term plan. In such a situation, the beneficiary can raise a life insurance claim and receive the death benefit listed in the term insurance policy.

Due to health conditions

Typically, death resulting from health-related issues is covered under a term insurance policy. However, a claim may be rejected if the demise was caused by pre-existing health conditions that were not divulged at the time of buying the term plan. The insurer will deny claims arising from health complications and death due to STDs (sexually transmitted diseases) such as HIV/AIDS.

If you are a smoker, it is of utmost importance that you disclose this fact while buying a term insurance plan. If you fail to disclose a smoking habit and death occurs due to smoking complications, the insurance company can deny the term plan claim. Smokers present a much higher level of risk to the insurer. Once disclosed, the insurance company factors the higher risk level and offers you a term insurance plan with a marginally higher premium to offset this additional load.

Due to accidents

Most term plans feature coverage for accidental death. Even if the base plan does not offer accidental death coverage, you can easily add a rider to cover you and your family members. With an additional rider, an extra amount is paid as a sum assured over and above the basic sum assured if the policyholder succumbs to accidental death. Some riders also cover permanent total and partial disability resulting from an accident.

Due to driving while intoxicated or drug overdose

If the policyholder's demise occurs while driving under the influence of narcotics or alcohol, the insurance company will deny the claim. Most insurance companies do not offer term plans to people who drink excessively. Death occurring due to narcotics abuse is not covered at all.

While purchasing the term plan, you are asked a few questions about your occupation and smoking and drinking habits—it is pertinent that you answer truthfully. You can avoid the potential rejection of a claim by correctly disclosing the type and amount of alcohol you consume while the term plan is still in its proposal and underwriting phase.

Due to self-inflicted injury or dangerous activities

A term insurance policy does not cover you in case of death due to participation in dangerous activities and adventure sports such as racing, parachuting, skydiving, or hiking. Such hazardous activities increase the risk to any individual's life as they are likely to lead to fatalities and accidental disability. If you participate in adventure activities that fit the bill, it is essential to disclose this beforehand. If you do not, then the insurer has the right to claim material misrepresentation and deny your claim.

Due to suicide

Insurers offer limited coverage in case of suicidal death. Some insurance companies will deny a claim stemming from suicidal death if the insured commits suicide within a year from purchasing the term plan. Other insurers pay the nominee at least 80-100% of the total premiums paid during the first year in the case of suicidal death. Post the first year, most insurance companies offer suicide coverage according to the terms and conditions listed in the policy document.

Due to homicide

In case of the murder of the insured at the hands or behest of the nominee, the insurer will withhold the death benefit pay-out until the nominee is cleared of all charges or the case is dropped.

On the other hand, if it is found that the policyholder was involved in criminal activities which led to their death, the insurer will reject the claim. However, a person with a criminal background who dies due to health conditions or other natural causes will be covered.

Due to childbirth

Most people do not know that typically a term plan does not cover death that takes place during childbirth or due to pregnancy complications.

Due to natural disasters

Death due to natural calamities or acts of God such as earthquakes, tsunamis, lightning strikes, etc., are generally not covered under a term plan unless a specific rider is added to the base term insurance policy. Read the proffered terms and conditions properly before signing on the dotted line.

Keep in mind:

The preferred choice for more than 5.5 million customers like you, IndiaFirst Life Insurance assures 100% genuine claims settlement. The IndiaFirst Life Plan is a non-linked, non-participating, pure term insurance plan that provides you the benefits of a life cover for a period of up to 40 years.

For your convenience, online term plans like the IndiaFirst Life Guaranteed Protection Plan, IndiaFirst Life ETerm Plan, IndiaFirst Life Anytime Plan are also available at the click of a few buttons. Before you purchase any term plan, do your due diligence and go through the policy document with a fine-toothed comb. Once you know all the inclusions and exclusions of the term insurance plan, you can make the best choice for your coverage needs.

• The Insurance Regulatory and Development Authority of India (IRDAI) has strict rules outlining how to claim death benefits from two or more term insurance plans. Even while buying a new term plan, details of a pre-existing plan must be divulged to the insurance provider. Follow IRDAI claims process to the last letter to ensure that the beneficiary receives the pay-outs from both term plans.
• If the death of the policyholder occurs within three years of buying the term plan, the case is registered under Section 45 (Insurance Act of 1938) and will be thoroughly investigated to rule out fraud, material misrepresentation, and improper disclosure of relevant information. The importance of not lying to your chosen insurance company cannot be stressed enough. Once you are three years into the term insurance policy term, a claim can no longer be rejected on these grounds.