Term Insurance Policy: Death Claims

Deaths Not Covered by Term Insurance

Thinking about insurance might not be the most exciting topic, but it’s essential to understand how it works, especially when it comes to something as important as life insurance. In this article, we’re going to break down a few key things about term insurance, focusing on one important aspect – what happens when death isn’t covered by your term insurance policy. Not all types of deaths are covered by term insurance policies. We’ll explore what those types are and also provide a list of the most common causes of death that are actually covered by term insurance.

What Is a Death Claim?

Before we move on to talk about the deaths that are not covered by a term life insurance policy, we must understand what a death claim is and why a Term Life Insurance Policy takes responsibility for it.

A death claim is a formal request made by the nominee of a policyholder to receive the life cover amount. This claim is valid if the policyholder's death occurs during the policy period. The purpose of a death claim is to provide the nominee or the policyholder's family with financial assistance for their future. However, in some cases, the policyholder's death is not considered or covered.

Deaths Not Covered by Term Insurance

Death Due to Involvement in Detrimental Activities

Deaths due to participating in any detrimental activity like biking, paragliding, parachuting, car racing, or even drunk driving are not considered by the Term Life Insurance policy team. Since these adventurous activities lead to material misrepresentation and the policyholder is willingly involved, the team does not cover this death. Furthermore, such deaths are typically excluded as per policy regulations. Other sports activities and hazardous travel activities are also a part of this type of death.

Death Due to Committing Suicide

Suicide is another type of death not covered by the Term Life Insurance Policy, at least for the first year. So, if the policyholder commits suicide within the first year, the nominee will not receive the wealth benefit. It is only from the second year of holding the policy that the nominee might get the death covered. However, this is subject to the terms and conditions of the Term Life Insurance Policy.

Death Due to Undisclosed Smoking Habits

Individuals applying for a Term Insurance Policy must disclose their smoking habits during the application process. If the policyholder's death is linked to undisclosed smoking habits, it may be considered an unethical action, leading to the claim being denied. If smoking habits are disclosed during the application, an additional premium may be charged to cover the death benefit.

Death Due to Alcohol Addiction or Consumption

Alcohol consumption can have severe detrimental effects, impacting mental health and leading to fatal accidents, especially when driving under its influence. In such cases, the policyholder's death may not be covered, aligning with the Life Insurance policy's terms. Deaths resulting from the intake of narcotic substances or excessive alcohol consumption are typically not covered.

Death Due to Pre-existing Health Problems

Term Life Insurance policies typically do not cover deaths resulting from pre-existing health illnesses. Self-inflicted injuries, sexually transmitted diseases, and drug consumption are other instances where term life insurance may not cover the policyholder's death.

Death Due to the Murder of the Policyholder

There are two main scenarios under which death due to murder may not be covered. The first is when the nominee is implicated in the murder, and the second is when the policyholder was involved in criminal activities. In both these scenarios, the policyholder's family may not receive the death benefit.

However, C.S. Sudheer, CEO of IndianMoney.com, added clarity to this point by saying, "The pay-out would be made only if murder charges are dropped or on an acquittal. The insurer withholds the pay-out indefinitely, till resolution of the case in favour of the nominee."

Death Due to Natural Calamity or Tsunami

If the policyholder dies due to a natural disaster, anywhere across the world, their nominee may not receive the death benefit. This includes earthquakes, tsunamis, landslides, storms, or any other type of natural disaster, with no exceptions.

Death Due to Childbirth

If the policyholder's death occurs due to childbirth or pregnancy complications, it may not be covered by the policy. Consequently, the insurer may not pay any death benefit to the nominee.

List of Deaths Covered by Term Insurance

Certain deaths are covered after completing a waiting period (e.g., suicide), while others are covered through riders (e.g., terminal illnesses). Most insurers provide term insurance for normal deaths, including:

• Natural Causes: Term insurance usually covers deaths that occur naturally due to illnesses or medical conditions, such as heart disease, cancer, or diabetes.
• Accidental Death: If a policyholder passes away in an accident, such as a car crash or a fall, their family can usually claim the insurance money.
• Terminal Illness: Some term insurance policies cover cases where a person is diagnosed with a severe illness and has a limited life expectancy. In such situations, the insurance money can be claimed early to help with medical expenses and other needs, provided the policyholder has a critical illness rider with their term insurance.
• Homicide: If a person covered by term insurance is a victim of a crime and loses their life due to homicide, the insurance policy often provides coverage.
• Suicide (after a waiting period): While most term insurance policies do not cover suicide within the first one or two years of the policy, they often provide coverage for suicide-related deaths after this waiting period.

The Bottom Line

In this article, we discovered that not all types of deaths are covered under term insurance policies. It's essential to read your policy carefully and understand its inclusions and exclusions. Term insurance can provide financial support to your loved ones in case of natural causes, accidents, terminal illnesses, homicides, and even some cases of suicide (after a waiting period). Understanding both covered and excluded deaths under term insurance in India helps avoid surprises at the time of claims. However, it typically won't cover deaths resulting from risky activities, undisclosed habits like smoking, alcohol addiction, pre-existing health problems, involvement in crimes, natural calamities, or deaths due to childbirth.