Life insurance is essentially a contract between two parties – the life insurer and the life assured – wherein the former provides life cover to the latter in exchange for a cost known as premiums. In case the life insured passes away before the stipulated policy expiry date, their nominee or beneficiary will be entitled to receive the sum assured payout. However, life insurance is, after all, a business where profits and losses can make or break a company. Every insurer, in order to minimize their losses, has laid down a list of exclusions which are basically events/circumstances, and their consequences which will not be covered under the policy. If an insured dies under unclear circumstances, then it is the duty of the insurer to investigate the cause of death in detail to rule out foul play and also determine whether the death was caused due to an event or circumstance which the policy doesn’t cover.
For instance, a person has taken a life insurance policy right before going on a vacation where they’ll be participating in adventure sports like skydiving. In case the insured dies due to a skydiving accident, their nominee will not be entitled to any benefit, as this particular event or its consequence is not covered under the life insurance policy. Similarly, there are several other instances or events which are not covered by life insurance. Let us find out what these are.
Life-threatening activity – You may have noticed that insurance policies mention dangerous or adventure activities under exclusions. This is because of the high life risk that these activities are associated with, as a result of which they will not be covered. This exclusion will usually include adventure sports like skydiving, paragliding, rock climbing, scuba diving, vehicle racing, hang gliding, and other such adrenaline-pumping adventure sports.
Maternity-related – Usually, life insurance policies may not cover death caused due to pregnancy or pregnancy-related complications.
Pre-existing disease – Another standard exclusion in life insurance is death due to a pre-existing disease. Pre-existing diseases are diseases which the insured has been suffering from at the time of applying for the policy, or prior to cover commencement. These are usually not covered by life insurance.
Aviation-related loss – Most often, death in an air crash wherein the insured was traveling on a private airplane, will not be covered by an insurance policy. However, if the insured has died while traveling with a commercial airline which follows a set schedule and routes, the insurer may pay out the death benefit.
Participation in criminal/illegal acts – No insurance policy, sold by any the insurer, will provide cover for the risk posed due to participation in illegal/criminal/unlawful activities. This is one of the standard exclusions of every life insurance policy. This can include activities like driving under the influence of alcohol, consumption of intoxicants like drugs or alcohol, injury or death caused due to a car accident wherein the insured was not wearing a seat belt or was speeding, participation in illegal protests, etc. no insurer will pay or entertain a claim wherein the insured’s death has been caused due to an illegal or unlawful activity.
War/war-related acts – This is another standard exclusion in a life insurance policy which may be far less common in older days than it is now. As per this clause, if the insured has died due to a war act or any war-related activity, then the death benefit will not be paid out.
Suicide – Death due to suicide is an event which most life insurers will not cover, especially if the same has taken place within a period of 2 years, starting from the policy commencement date. In such cases, the death benefit might not be paid at all, but depending on the policy details, the nominee may get equal to or more than 80% of the total premiums paid for the policy till death. This refund of premium will be provided based on the terms and conditions of the policy.
Speaking of exclusion in life insurance policies, it is important to note that not all life insurance policies may have similar exclusions. Because of this, it is important that you check with your insurer and also go through the policy document in detail to find out what your policy will not provide cover for. Some other instances where a claim can be denied are as follows.
- Incorrect/misrepresented information – At the time of applying for a life insurance policy, all applicants must ensure that they do not misrepresent or misstate any facts or information regarding themselves. If the insurer happens to find any discrepancy in the information provided by you at the time of application, your policy can be canceled altogether.
- Giving incorrect age-related details – At the time of buying the policy, do not lie about your actual age. If you misstate your age, then your insurer is under every right to deny the death claim when it is raised.
- Contestability period – This brief period, which usually set at 2 years for life insurance providers in India, is a time during which the insurer can thoroughly investigate death claims and even deny them. This period is basically a time when the insurer will review the policy’s underwriting and investigate whether the information provided by the applicant is correct, complete and true. In case of any discrepancy, they can withhold the death claim payout.
Considering all that has been mentioned above, one can draw the conclusion that insurance is not something that must b taken lightly. It is a tool which will ensure the financial safety and well-being of your loved ones especially at a time of misfortune. Therefore, it is important for every buyer to read their policy document carefully and understand what it offers thoroughly.