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Types Of Death Covered And Not Covered In a Term Insurance

Term insurance is one of the purest forms of life insurance coverage that provides sum assured to the beneficiary if the policyholder has a sudden demise. If the policyholder survives through the term, the insurance coverage ceases, and the insured person is not liable to receive any pay-outs.

Types Of Deaths Covered

The insurance covers typically two death instances – death due to medical condition and accidental death.

1. Death due to a medical condition or natural death

This is the most common type of death covered in term insurance wherein insurance companies accept to release sum assured if the policyholder dies naturally in sleep. On the other hand, if the cause of death is illness or disease, the beneficiary gets a lump sum payout.

2. Accidental death

Accidental demise of an insured person is defined as death due to unforeseen events caused by violent or visible force. Most term insurance companies offer this benefit as an independent rider/add-on wherein the nominee gets the extra sum assured along with the basic insurance cover.

Types Of Deaths Not Covered

When it comes to providing coverage in case of the death of the policyholder, the insurance policy has some exceptions. The insurance companies refrain from offering any financial assistance if the cause of death is unnatural, intentional or caused by external events. These include:

1. Death by Suicide

If a policyholder dies due to suicide within the 12 months from the date of the policy, the beneficiary gets nearly 80% of total premium paid by the insured person or applicable surrender value under a non-linked plan. Alternatively, the nominee is entitled to get 100% of the total premium paid in case of linked plans.

2. HIV/AIDS

There are very few insurance companies that offer compensation if the cause of death is due to sexually transmitted diseases like STDs or AIDS. Most often, this type of incidence is not covered.

3. Intoxication

If the policyholder succumbs due to consumption of alcohol, drugs or any intoxicating substance, there is no financial assistance to the deceased member’s family.

4. Self-inflicted injuries

The insurance company has the right to reject the claim of the nominee if the insured person dies due to self-inflicted injury or adventurous activity.

5. Natural Calamity

The deaths that take place due to any natural calamity will not be covered by the insurance company unless the policyholder opts for an additional rider.

6. Homicide

The insurance company rejects the claim if the death of the policyholder is due to murder committed by the nominee. If required, the company can put it on hold until the nominee is acquitted.

Conclusion

The death reasons may vary; hence policyholders should understand the terms and conditions of the policy to avoid last-minute discrepancies during the claim process.

Also read- Here Are Some Frequently Asked Questions About Life Insurance Riders.

What Is The Best Way To Pick The Right Term Insurance Rider?

Disclaimer

This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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