What Types of Deaths Are Covered in a Term Insurance Plan?

• 11th Oct 2021
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In the wake of the Covid-19 pandemic, many term insurance policyholders are re-verifying what kind of deaths are covered by their respective policies. While a term insurance policy provides coverage for death due to natural causes, it has its limitations.

Death caused due to some reasons like alcohol intoxication and drug abuse are not covered under a term plan. When the policyholder's family raise a claim request, the insurance company investigates the cause of death. If the death is caused due to conditions that are not covered under the policy terms, the insurer will not honour the claim.

So, it is crucial to understand what kind of deaths are covered under term life insurance.

Let us look at the type of deaths covered under term insurance.

Natural Death

Term life insurance plans cover natural death or death caused by any health-related issue. Suppose the policyholder passes away due to any critical illness or medical condition. In that case, the nominee can expect to claim the insurance and be paid the death benefit without any problems.

Death Due to Covid-19

The recent spike in mortality due to Covid-19 sent policyholders in a frenzy, seeking clarity on whether a death due to the disease was covered under their term plans. The government clarified that death due to Covid-19 came under health-related death, and existing term plans very much cover it.

Accidental Death

Deaths due to accidents like car accidents are covered under term insurance. An accidental death entitles the nominee to the basic sum assured amount. Insurance providers also offer an accidental death rider that promises an additional sum over the basic sum assured in case of accidental death.

However, there are some cases where accidental death claims may be rejected. If the accident occurred because of alcohol intoxication while driving, for example, or during criminal activity, the claim may be rejected. Accidental deaths due to adventure sports are also not covered under a basic term plan.

Death by Suicide

If the policyholder dies by suicide within the first 12 months of commencement of the term plan, the family receives 80% of paid premiums. In the case of a linked plan, the family stands to receive 100% of the paid premiums.

If the policyholder dies by suicide after 12 months of commencement of the policy, then the nominee shall receive the entire assured sum. Please ensure you read the terms and conditions of your policy before buying since many insurers do not provide coverage for death by suicide.

Deaths not Covered by Term Plans

• Death due to alcohol consumption or any other intoxicating substance
• Death due to self-inflicted injuries
• Death due to HIV/AIDS or other Sexually Transmitted Diseases

Final Word

The death coverage terms of a term insurance policy may vary from insurer to insurer. Hence, you must be well-informed about your policy terms to avoid filing a false claim.

- A Consumer Education Initiative series by Kotak Life