Term insurance policies offer high financial protection to the family of the life insured at a very low cost, in the event of unfortunate death of the life insured.
A lump sum death benefit is paid to the beneficiary, in case of demise of the insured during the policy tenure. Even though they are one of the best life insurance options one can have, it is better to have knowledge about the kind of deaths that are covered or not covered by the term plan in India.
It is always better to be aware of the terms and conditions of the insurance policy so that there will not be an unpleasant surprise to your family members or dependents upon your death.
Let’s see what kind of deaths are not covered in term insurance.
- Death due to driving under the influence of alcohol won’t be covered - The insurance company will deny the claim if the life insured's demise resulted from driving while drunk or under the influence of drugs. Life insurance plans are rarely offered by insurance companies to heavy drinkers or drug users. The insurance company will deny the death payment if the life insured failed to disclose these practices while purchasing the term insurance policy.
However, if you drink, you can prevent claim rejection by accurately declaring your history of alcohol consumption (including the type and amount consumed) on the proposal form at the time of underwriting.
- Accidental death due to driving under the influence of drugs - The life insurer will deny the claim if the life insured's demise resulted from driving while drunk or under the influence of drugs.
- Death due to the participation in hazardous activities - Term insurance does not provide coverage for deaths brought on by engaging in risky activities. These actions put the life insured's life in danger and could cause serious accidents.
- Death due to the participation in adventure sports - You must reveal this information when purchasing the policy if you, the life insured, engage in adventure activities like skydiving, paragliding, parachuting, and trekking. The insurer is not required to accept the claim if this is not done since it is regarded as a significant misrepresentation.
- Death due to pregnancy and childbirth - The insurer would not give the nominee the sum assured if the life insured passed away as a result of pregnancy-related issues or childbirth. A term insurance policy will not provide coverage for death happening during childbirth at the time of pregnancy.
- Death due to the pre-existing health condition - The insurer will not pay out in the event of a death caused by a condition that existed when the term insurance policy was purchased. A typical term insurance policy does not cover a variety of different dying situations. Deaths brought on by self-inflicted harm or risky behaviours, sexually transmitted diseases like HIV or AIDS, or drug overdoses are not compensated by the insurer unless they are covered by a rider.
- Death caused due to the participation in illegal activities – There are two possible cases in this situation. They are as follows:
- Case 1: If the nominee is a criminal - If the life insured is killed and it is later discovered that the nominee was also apart of the crime, the insurer will not pay the claim. Only if murder charges are dismissed or there is a verdict would the compensation be given. Until the court's verdict is decided in the nominee's favour, the insurance company will always refuse to give the payout.
- Case 2: If death of policyholder was due to involvement in criminal activity - If the life insured is murdered as a result of his engagement in illegal activity, the term insurance company will not pay the claim. The policy does not provide coverage for deaths resulting from participation in any illegal action as that term is defined by the law. However, if the policyholder has a criminal history—that is, if they have a criminal record—but passes away due to a natural disaster, such as the flu, dengue fever, or being struck by lightning, the nominee will be awarded the claim.
- Suicidal Death - In case the insured commits suicide during the initial 12 months from the date of policy commencement, the 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 the completion of 1 year of policy, the benefits of the policy will be nullified and the policy will be terminated. There are certain life insurance companies that may or may not provide coverage for the suicidal death.
There are certain exclusions under the lifestyle category. If you happen to smoke, it needs to be mentioned in the policy. The following which the insurance company will charge additional premium to assess the risk of death due to smoking. In case of chain smokers, this will pose a great risk to insurance companies. If you try to conceal the information about your smoking habits, the company may reject the insurance claim. Also if you abuse your body in any other way meaning self-destruction, the policy claim may be rejected by the insurance company.
Apart from the above mentioned pointers, let’s take a look into what kind of deaths are not covered in term insurance.
- Self-inflicted injury: If the cause of death is due to self-inflicted injury or any hazardous adventurous activity, the claim will be rejected by the insurance company.
- HIV/AIDS: The insurance claim will not be admissible by the insurance company if the death takes place due to sexually transmitted diseases like HIV or AIDS.
- Intoxication: If the death takes place due to the consumption of alcohol or any form of drugs, the insurance company has the right to reject the claim.
- Homicide: If the policyholder dies due to the murder committed by the nominee, the insurance company will reject the claim. If the investigation takes place, the insurance company will put the claim on hold until the acquittal of the nominee.
- Natural disasters: The deaths that take place due to any natural disaster will not be covered by the life insurance company unless the policyholder goes for additional rider.
If there is a change in lifestyle after the subscription of the life insurance policy, the policyholder is not liable to share the information. On the other hand, if you are addicted to smoking after buying the policy, the insurance coverage applies and the insurance company should process the claim without any issues. If there are any issues in claiming the policy, you can approach the grievances cell of the insurance company or Insurance Regulatory and Development Authority directly.
What types of deaths will be covered by term insurance plans?
Out of the many scenarios, deaths in the following will be covered by the term insurance plans:
- Any natural death or health-related issues will be covered by term insurance plans.
- In case the policyholder dies due to any type of critical illness or medical condition, the beneficiary of the policy will get the sum assured as the death benefit.
- Term plans also provide coverage in case of death of the insured due to an accident.
- Moreover, many term life plans come with an additional accidental death benefit riders under which extra sum assured is paid to the beneficiary of the policy along with the basic sum assured, in case of accidental demise of the insured person.
Future Generali Flexi Online Term Plan provides this option of income protection for those who want to secure their family’s future in the long run. A free look-in period and a grace period of up to 30 days to pay your premiums are some of the benefits that you get along with it. To know more connect with a trusted financial advisor today!
How to Make a Term Insurance Policy Claim Policy after Death?
In the event of the insured's death, life insurance protects the insured's family against the risk of income loss. For an insurance claim to be paid out, the insured's family or nominee must follow the prescribed procedure. The following steps that must be taken to make a term insurance claim after death:
Step 1: Inform the Agent
The insurance agent has a duty to help the grieving family with the claim procedure by giving information about the policy and supporting documentation. Thus, informing the agent of the insured's passing is the first step.
Step 2: Claim Intimation that is Inform the Insurance Company
As quickly as possible after the insured's death, the nominee must notify the insurance company. The details including the date, location, and reason for the death should be included in the claim notification.
Step 3: Fill the Claim Form and Submit the Documents
Once the insurance company has been notified of the death, it will record the information and ask the claimants to complete a death claim form and submit it with a list of documents. The needed documentation is as follows:
- Death certificate
- Original policy document
- Deed of assignments, if any
- Discharge form
- Don't forget to obtain the acknowledgment receipt once the insurance company has received the documents (do keep this safe).
- In the absence of a nomination, the claimant must provide documentation proving his legal right to file the claim.
Step 4: The Processing of the Claim by the Insurance Company
The insurance provider will examine the claim and could want more paperwork. However, the nominee will probably get the settlement money within a month if no other paperwork is needed.
In case, the payout is not a credit in your bank account within a month, the nominee should visit the insurance company's branch (do carry the acknowledgment sheet) to examine the progress of the
Points to note
- Claim intimation can be made by any relative of the insured, even if they are not a nominee or assignee.
- In case of a unit linked insurance plan, the death claim is equivalent to the sum assured or the fund value, whichever is higher.
If no other additional documents are required, then the nominee is likely to receive the settlement amount in one month's time. However, if there is no credit in your bank account within a month, then the nominee should visit insurance company's branch (do carry the acknowledgment slip) to check the status of the same.