What Kind of Deaths are Not Covered in a Term Insurance Plan

Life is unpredictable, you never know when it will be your last day living in this world. It is one of the harshest truth that no one wants to think or talk about. Everyone feels if they are healthy and well, nothing will ever happen to them. Unfortunately, we all hear the sad news of the untimely passing of people around us all the time. Term Insurance plans are a vital part of our everyday lives. It's the protection which is needed for dependents in the family to tackle any adversities that may come upon us without any warning. In times of crises, a term insurance plan will act as a saviour and having one is the best gift you will ever give to your family and loved ones.

What is the Benefit that One Gets Under Term Insurance Plan?

Term insurance plan pays out the benefit to the nominee upon the death of the policyholder who in most cases is the breadwinner in the family. The pay-out can be lump sum amount, monthly installments or both depending upon the choice made when the term insurance policy was purchased.

So, term plan gives protection against untimely death but deaths can be classified into various categories. Let's understand what types of death are covered, not covered and exclusions for term insurance death benefit pay-out.

Health-related or natural death

Health-related death or natural death are covered in term insurance plan. If the policy holder gets a disease or medical condition which eventually results in his/her death, then the nominee will get the term insurance pay-out.

Accident related death

Accident related death is also covered in term insurance plan. If a person gets involved in a road accident which causes sudden death or dies after few days in hospital then the nominee will get the term insurance pay-out. But wait there is an exception to this, if it is found by the insurance company that the policy holder was intoxicated or was under the influence of any drug or narcotic substance while driving or was involved in a crime or escaping after breaching any law which caused accidental death then pay-out may get rejected. Term insurance clause also excludes death due to an accident from involvement in adventurous sports like parachuting or skydiving or dangerous sports like power-boat racing, timed motor sport or any other activity.

Homicide

If the policy holder gets murdered and the insurance company's investigations reveal the nominee has murdered or is involved in the crime then the death benefit pay-out will be rejected or withheld until such a time that the charges are dropped and acquittal is given. So, the lesson learnt here is don't plan on taking term insurance with an intention of defrauding the insurer by getting the insured killed. Not only is it a gruesome crime against humanity, but your plan to get paid term insurance benefit certainly won't work. It will definitely land you in jail for a very long time.

Death by Suicide

The insurance regulator IRDAI (Insurance Regulatory and Development Authority of India) has made changes in the suicide clause from 1st January 2014. So, all the policies issued before 1st January 2014 will have the old clause of suicide while the new suicide clause will be applicable to the policies issued after 1st January 2014. Let's understand the suicide clause in both cases.

The suicide clause for all the policies issued before 1st January 2014 states

“If the life assured commits suicide within one year from the date of start of risk or date of revival if revived, whether sane or insane at that time, the policy will be void and no claim will be payable.”

So, if the policyholder commits suicide after one year of the start of the policy, then the death benefit will be compensated. Some of the companies have a longer waiting period of 2 years for such claims. It is highly advised to look at the terms and conditions of the policy.

For the policies issued after 1st January, 2014

In case of linked plans, if the suicide is committed by the policyholder within 12 months from the start of the policy in the course of the policy term, then the nominee is eligible to receive 100% of the policy fund value. In case of non-linked plans, the nominee will receive 80% of the premium paid in case of death claim due to suicide even within 12 months from the start of the policy during the policy term.

All in all, it is highly recommended to go through your policy document and understand the terms and conditions of the term insurance policy. It is equally important to educate your nominee on the inclusions and exclusions of the term insurance pay-out clause so that they have a hassle-free claim process.

Recommended Read: Types of Death Covered in Term Insurance