Terms and Conditions of Term Insurance Plans
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Terms and Conditions of Term Insurance Plans

Term life insurance plans' terms and conditions can differ from one insurer to another. To learn more about the terms of term insurance and common exclusions, visit website.

  • Oct 10, 2019
  • 10,443 Views

The importance of a term plan is vast when it comes to protecting the future of your loved ones. The affordable premiums and high returns make a term insurance policy one of the most popular life insurance plans available today. In case of the policyholder’s demise, nominees can initiate an insurance claim to avail of the benefits. However, insurers have specific insurance terms and policy conditions of life insurance when meeting an insurance claim.

These policy conditions of life insurance are exclusions or scenarios that can result in a rejection of the claim. Even though the terms and policy conditions of life insurance may vary from insurer to insurer, you need to be aware of various standard exclusions, as explained.

Term Plan Terms and Conditions:

Exclusion in accidental death

Accidental death is included in the term insurance plan, but that does not mean the claim made under such a scenario will always be accepted. In case of accidental deaths, insurance companies always investigate the circumstances of the incident. The procedure of such an investigation might vary from insurer to insurer, but the findings must be satisfactory for the claim to be accepted.

Conditions regarding lifestyle

Death caused by lifestyle choices can be excluded from the policy. For example, insurance companies always confirm if the insured is a smoker. The habit of smoking is a lifestyle choice that can shorten the insured’s life. Hence, smokers are considered to be high-risk policyholders. Therefore, if an insured does not declare the smoking habit while buying the policy, the insurer might reject the claim in cases where the death is related to smoking.

Death due to suicide and self-harm

The term insurance terms and policy conditions of life insurance always exclude any death related to self-harm or suicide. However, some insurance providers offer to return the premium if the policyholder commits suicide within a year. The insurer deducts specific fees in that case. Moreover, death by participating in dangerous activities is excluded from the policy.

Death from participating in criminal activities

A term insurance policy is designed to provide financial aid to the policyholder’s family in case of an unexpected death. Therefore, if an insured engages in any activity with a higher risk of life, insurance companies are entitled to reject the insurance claim. Death from participating in riots or any other criminal activity meets that condition; hence, they are excluded from the policy.

Death due to intoxication

The term insurance exclusions of almost every insurance company mention any death due to intoxication. If the policyholder consumes drugs or excessive alcohol, and if this habit results in death, the insurance company is not liable to pay the cover.

Inclusions and Exclusions in Term Insurance

It’s critical to inform your beneficiaries of the terms and policy conditions of life insurance that come with your term insurance policy if you have a term insurance policy. Beneficiaries should be aware of the full scope of a term policy’s coverage as well as what to anticipate during claim settlement. After all, beneficiaries should gain from a death claim, and they should be familiar with the terms and circumstances of term life insurance. Included are the things that a term insurance policy will pay a death benefit for and covers.

Free Look Period

A free look period of 15-30 days is provided under term insurance policies, during which the life assured can choose to terminate or return the policy if he or she is dissatisfied with it. The policyholder may cancel or return the policy by citing valid reasons for dissatisfaction with the policy. If the life assured decides to terminate the term insurance policy during the free-look period, the insurance company would refund the premium paid after deducting the insurance company’s medical examination expenses and the proportionate risk premium.

Grace Period

The insurance company provides a grace period of 30 days from the first overdue premium payment date. The term insurance policy will be declared lapsed if the premium is not paid during the grace period.

Revival of Policy

Term insurance plans can be reinstated within 2-5 years of expiration. The policy can be renewed by paying the outstanding premiums at the current interest rate. Interest rates fluctuate and are determined by the insurance provider.

Tax Benefits

Premiums paid for term insurance policies are tax deductible under applicable tax regulations and conditions. Premiums paid for term insurance policies are tax deductible under Sections 80C and 10(10D) of the Income Tax Act of 1961.

Nomination

Section 39 of the Insurance Act of 1938 allows the policyholder to make a nomination at any time throughout the policy term. Nominations must be made in writing to the insurance provider or through an endorsement of the policy.

Assignment

Section 38 of the Insurance Act of 1938 allows the policyholder to assign the policy to transfer the policy right at any point throughout the policy term. An insurance policy endorsement is required for the assignment.

Now that you know the term life insurance exclusions to, be sure to maintain a lifestyle that does not expose you to the loss of life, which might result in the insurer denying your nominees’ insurance claim.

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Ref. No. KLI/22-23/E-BB/492

T&C

- A Consumer Education Initiative series by Kotak Life

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