Term insurance acts as a saviour in case of any mishap or unfortunate event; this cost-effective insurance product provides financial protection to the family or dependents of the policyholder so that they tackle any difficulties that may come upon them. In the case of term insurance, nominee receives financial assistance (claim) only in case of the death of the insured person. Thus, while buying a term insurance cover, one must go through all the terms and conditions, especially the types of deaths covered/not covered under the given term insurance policy so that they do not face any problems or dispute at the time of filing the claim. Here’re the major types of deaths and their claim acceptability under Term insurance.
1. Natural Death: Term insurance covers natural death. In such case, if a policyholder dies due to any health-related issues or due to old age, then his/her nominee will receive the sum assured as per death benefits. However, if the insured person hides or misinterpret any pre-existed health-related problem in the policy application, then the claim may get rejected.
2. Smoking habits: Insurance companies also charge higher premiums for smokers. If the policyholder has not informed about his/her smoking habit to the insurance company, then there are higher chances that the claim gets rejected. Therefore, one must provide full information correctly in the application form. However, if the smoking habit is developed after the start of the policy term, then claim will be paid on death.
3. Accidental deaths: Death of the insured person due to accident is also covered under term insurance. Moreover, if additional accidental benefit rider has been taken by the policyholder, then extra sum assured as per rider’s term will be paid to nominees.
4.Intoxication: If the death of the insured person is due to an overdose of drug or alcohol, then the claim will be rejected. This means the policyholder will not be eligible to receive any death benefits from the insurance company in case of intoxication.
5. Natural Calamity: A Term insurance policy also covers death due to natural disaster like severe weather conditions, earthquake, lightning, flooding etc. However, in a few cases, such deaths are covered through the addition of rider(s). So, such clarification from the insurance company must be sought before taking the insurance policy. The policyholder will not receive any such benefit unless he/she hasn’t opted for the rider.
6. Deaths due to sexually transmitted diseases HIV or Aids are not covered
7. Adventure activities: Death due to participation in bike/car racing or due to participation in adventure activities like trekking, bungee jumping, hiking, water sports etc., are also not covered.
8. Criminal activities: If an insured person was involved in illegal or criminal activities and his death was due to involvement in such activities, then also the claim will be rejected.
9. Suicide: If the insured person commits suicide during the first year of the policy, the claim will be rejected. However, some of the insurance companies returns premium paid by the insured. Thus, buyers must go through the policy terms and conditions and know about its inclusions and exclusions before buying it. However, suicide in the second year of the policy is generally covered by the companies.
10. Fraudulent claims/Homicide: If the beneficiary of the insurance policy murders the insured person and the investigation proves him/her guilty, then the insurance company will not accept the claim.
Listed above are some of the most common queries regarding deaths covered in the term insurance policy; however, one should read out and discuss this with the insurance adviser considering all the terms and conditions that are given in the policy document. If any doubt persists regarding coverage, then it must be sought from the insurance company before taking the term plan from insurance company so that purpose of taking the life insurance is not defeated at all.