InvestorQ : Is it true that not all deaths are covered by term insurance?
Monali Shah made post

Is it true that not all deaths are covered by term insurance?

Answer
user profile image
Pratik vyas answered.
2 years ago


While term insurance plans are specifically designed to provide insurance coverage to the nominee of the insured person, there are certain death cases not covered by the insurance company. Let’s take a look at the types of death covered and not covered by insurance companies.

1. Suicide: While earlier insurance companies had a blanket exclusion towards suicide case, sector regulator IRDAI made changes to the suicide clause in 2014. So now, if the policyholder commits suicide during the initial 12 months from the date of policy commencement, then the nominee or beneficiary is eligible to receive 80% of the premium paid if the policy is a non-linked one. In case of linked plans, if the policyholder commits suicide during the initial 12 months from the date of policy commencement, the beneficiary of the policy receives 100% of the total premium paid. However, if the policyholder commits suicide after completing one year of having taken the policy, then the benefits of the policy will be nullified and the policy will be terminated. Certain life insurance companies may or may not provide coverage for suicidal deaths. It is very important for insurance buyers to go through the terms and conditions of the policy and know the inclusions and exclusions of the policy before they purchase it.

2. Accidental demise

While term plans provide coverage in case of death of the insured due to an accident, there are certain exception to this. If the policyholder was under the influence of alcohol or any type of drug while driving or was involved in any type of criminal activities, then that could lead to the claim getting rejected. Additionally, life insurance plans also exclude the death of an individual due to involvement in adventure sports like skydiving, parachuting, rafting, bungee jumping, etc.

3. Self-inflicted injuries

If the death of the insured happens due to self-inflicted injuries or a hazardous activity, then the claim made by the beneficiary will be rejected by the insurance company.

4. HIV/AIDS

Insurance companies will not accept the claim of a policyholder if the death of the insured occurs due to any type of sexually-transmitted diseases like HIV or AIDS.

5. Intoxication

If a policyholder dies due to overdoes of drugs or alcohol, then the insurance company will not provide any death benefit to the beneficiary.

6. Case of homicide

If the insured gets murdered by the nominee/beneficiary and the investigation reveals the involvement of the nominee in the crime, then the insurance company will reject the claim raised. The claim request will be put on hold by the insurance company until the nominee’s name gets cleared.

7. Tsunami or natural calamity

If a policyholder dies due to tsunami or any other natural calamity, the insurance company will not provide any coverage. The exception to the rule is if the policyholder opted for any rider benefit for the same.

8. If nominee claims for more than two policies

If the life insurance nominee puts in claim for two or more term insurance policies, then he/she should follow the steps as per the guidelines of IRDAI. The nominee must, in fact, submit the details of existing term life insurance plan while purchasing a new one. The information of the policy should be provided in the proposals form. Not doing the same will result in claim rejection.