One of the purest forms of life insurance is a term insurance plan. These plans have been around for a long time, and are among one of the most popular choice for millions of individuals looking to get life insurance to protect their loved ones. Term insurance plans are characterized by certain features which are almost uniformly seen in most term plans. These include offering a high amount of sum assured cover, affordable premiums, fixed policy period ranging from 5 to 30 years, and provision of a death benefit which is provided when the policyholder passes away before the end of the policy term.
When it comes to insurance, many people still view it as an investment, which may not be the correct way of approaching the product. A term insurance plan is not an investment, but a tool to ensure your family’s financial stability, if you happen to pass away suddenly. It is only an investment towards your own peace of mind that you get knowing that your loved ones will be provided for if something were to happen to you.
Speaking on the topic of coverage that is provided by a term insurance plan, there are certain causes of demise which are covered, and some which aren’t covered. Listed below are some of the causes of death which may not be covered under a term insurance policy, and for which, a claim may not be approved by the insurer. This is not an exhaustive list, and may differ from insurer to insurer, as well as the terms and conditions of your policy.
- If you have not fully disclosed all facts pertaining to what has been asked on your insurance proposal.
- If death has been caused due to a disability or a critical illness that is not covered under the policy.
- If the beneficiary is under 18 years of age or a minor. In this case, the sum insured benefit is usually paid out to the minor’s guardian or a trustee appointed by the insured.
- In case there is a difference in nominee details in your insurance policy, and your will. The sum insured will be paid out to the beneficiary named in the policy.
- If you survive your policy term, no payout will be made.
- If the insured policyholder commits suicide. Usually, in case of death due to suicide, there is a contestability period that is applicable. If the suicide has taken place after this period, the policy may honour the claim. However, this is subject to the terms and conditions of the policy.
- If the policyholder has been killed while they were in a country that is out of the scope of the policy’s coverage.
- If the policyholder is killed during any war or war-like activity.
- Most policies will not provide cover for high-risk or extreme sports activities like sky-diving, bungee jumping, etc. Death due to participation in a restricted activity will result in a loss of claim.
- The policy will definitely not provide cover if it has lapsed due to non-payment of premiums, even beyond the revival period.
Life insurance is an agreement between the insurer and the insured, on the principle of utmost good faith. When taking a life insurance policy, it is important for the insured to find out every last detail pertaining to the exclusions under the policy they are looking to purchase, so as to avoid having a claim rejected. It is also the duty of the insurer to inform the buyer about the same, so as to help them understand the exact coverage they will be getting under the plan they are looking to purchase.