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6 Types of Deaths that are Not Covered in Term Insurance

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  • 23rd Nov 2020
  • 1,072
6 Types of Deaths that are Not Covered in Term Insurance

Term insurance is an excellent way to ensure the financial wellbeing of your loved ones in case of any eventuality. These policies come with affordable premium rates and offer a lump sum death benefit to the beneficiary.

However, there are a few instances that can lead to rejection of the claim. If you have a term insurance policy or are planning on purchasing one, it is vital to know about them.

Here are some eventualities that are not covered by term insurance policies:

1. Death due to homicide

Case I: The nominee is responsible

The claim will be rejected by the insurer if the policyholder is murdered by the nominee. In such cases, the payout will not be made unless the murder charges are dropped or until the nominee is acquitted in a court of law.

Case II: The policyholder was involved in a criminal activity

In case the policyholder’s death occurred due to their involvement in criminal activity, the insurer will not settle the claim.

Case III: The policyholder’s death is caused by a terrorist attack

The insurer might reject the claim in case the death occurs due to a terrorist attack. Many insurance companies do not offer a cover for such incidents. Check with your insurance provider for this.

2. Death due to intoxication

If the death of the policyholder occurs while driving under the influence of alcohol or due to an overdose of narcotic substances, the death benefit will not be paid by the insurance company. Most insurers do not issue term insurance policies to heavy drinkers or drug users. To avoid rejection of the claim, it is paramount that you disclose the history of alcohol consumption or drug use in the proposal form during underwriting.

3. Death due to man-made calamities

Death occurring due to man-made disasters like an invasion, war, foreign hostilities (declared or undeclared), an act of foreign enemy, truce (armed or unarmed), mutiny, civil war, rebellion, insurrection, revolution, civil commotion, riots, strikes, power usurpation, military usurpation, etc. If the policyholder dies because of these man-made calamities, the claim will be rejected by some insurers. Check your policy details to confirm whether death due to natural calamities is covered or not.

4. Death due to hazardous activities

Activities such as skydiving, parachuting, paragliding, and hiking can lead to fatal accidents and pose a threat to the policyholder’s life. As a result, such incidents are not covered by term insurance. If you engage in these activities, then you must disclose this information to the insurer while purchasing the policy to avoid the rejection of your claim later.

5. Death due to suicide

In case the insured person commits suicide within the first 12 months of the policy term, then the nominee is not bound to get any death benefit. However, most insurers offer coverage for suicidal death from the second year onwards.

6. Death due to pre-existing health conditions

If the policyholder dies because of a pre-existing medical condition that they may have had before purchasing the term insurance policy and did not disclose, the insurer has the right to not accept the claim. Similarly, death due to self-inflicted injuries or sexually transmitted diseases like HIV is not covered either.

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Final Words

While a term insurance policy has a few exceptions, it is an excellent financial tool to keep your loved ones protected and offers a wide host of benefits:

1. You get high coverage amount at extremely affordable premiums

2. You can pay the premium payment options – single pay, limited pay and regular pay

3. For regular and limited pay options you can pay yearly, half-yearly, quarterly or monthly premiums

4. The sum assured can be availed by the nominee in varied ways – 100% lump sum payout, level recurring payout, and increasing recurring payout.

5. The death benefit paid to the nominee is exempt from taxes under Section 10 (10D) of the Indian Income Tax Act.

Buying a term life insurance plan is your way of keeping your family financially secure after your untimely demise. This is why it is important to always check the terms and conditions of your policy carefully. Always compare the features, coverage and exclusions before buying a term insurance plan.

- A Consumer Education Initiative series by Kotak Life


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