Types Of Death Covered And Not Covered In a Term Insurance
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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?
