What All Are Included In Term Plans?
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To understand what terms and conditions of term insurance are all about, you should know a little bit about term insurance and its purpose first. In simple terms, term insurance is an insurance policy that a policyholder has, wherein the policyholder pays premiums to the insurance company. These premiums are paid for a period, the given ‘term’. Hence, this policy is held for a given term with a maturity date. In case of the unfortunate demise of the policyholder while the term is in progress, the nominee mentioned on the policy gets a payout to hand over to the beneficiaries mentioned in the policy document. As with any insurance policy, a term plan comes with term insurance conditions that are essentially clauses about what the plan includes and excludes. Since term insurance plans come with a death benefit for beneficiaries, this is the main inclusion condition in the plan. Consequently, before you buy term insurance, it is important to note the inclusions and vital exclusions of the plan.
Inclusions and Exclusions in Term Insurance
If you are a term insurance policyholder, it is important to make your beneficiaries aware of the terms and conditions that are a part and parcel of your term insurance policy. Beneficiaries should understand and know exactly what is covered by a term policy and what to expect when claim settlement takes place. After all, beneficiaries should benefit from a death claim, and they must be well-versed with term life insurance terms and conditions. Inclusions are what the term insurance policy covers and for which a death benefit will be given. Exclusions are terms excluded from coverage by term insurance. Thus, should a death occur, death benefits would not apply. Claims would be rejected if death circumstances fall within exclusions. It is more important to know what terms of coverage are excluded from a term policy, and this sheds some light on what is included.
Exclusion Terms - Accidental Death
Under the clauses of a term insurance policy, an accidental death as the cause of death warrants a death benefit. However, there are some circumstances under the ‘accidental death’ clause that do not give out a death benefit. In case a policyholder’s demise is due to an accident, insurers investigate the issue before they settle claims. A dedicated team of professionals and healthcare experts will look into the circumstances of the accidental death, and if it is found to be an authentic case, claims will be settled accordingly. Term plan terms and conditions are very stringently adhered to in order to prevent fraudulent claims.
Exclusion Terms - Habits and Lifestyle
Causes of death may be varied and insurers need to be sure that in case of the untimely demise of a policyholder, beneficiaries rightfully deserve death benefits. Before buying any product of life insurance, therefore, insurers insist on information about a policyholder’s habits and lifestyle that could be the potential cause of death. This information is handy to insurers should a death occur due to any of these habits, namely alcohol consumption, smoking, or consuming intoxicants. To put it plainly, policyholders falling within these categories of habits are considered high-risk applicants, relative to those who do not have these lifestyle habits. Consequently, policyholders who have such habits may be able to avail term insurance, but will have to pay higher premiums according to term insurance plan terms and conditions. Additionally, based on this information, insurers may honour or reject a claim in the event of the policyholder's death. The rejection of a claim will almost certainly be the case if the policyholder has held back information regarding lifestyle habits.
Terms and Conditions Regarding Other Exclusions
The main exclusions that make up the terms and conditions of a term plan have been mentioned above. However, there are other clauses that determine whether claims can be rejected or fulfilled. These exclusions are also part of a term plan’s terms and conditions and before buying a plan the following must be attended to carefully:
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Existing Medical Condition
Normally, term insurance plans include a period of waiting in case a policyholder has a pre-existing medical condition. This may be different for various critical health diseases/conditions before the coverage of insurance begins. The waiting period is typically between 3 months-4 years for several term policies in India. Therefore, if the insured person dies as a result of a pre-existing medical disease or condition within the waiting period, then claims made for the death benefit may be rejected by the insurance company.
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Self-Inflicted Injury/Suicide
In the event the insured individual dies by self-inflicted harm/ injury, or suicide, the insurance company may not process the claims made by nominees or beneficiaries. Furthermore, particular insurers do not have ‘death by suicide’ listed in their exclusions. Some term insurance terms and conditions state that in case the insured person dies due to suicide within the initial year of the term insurance plan, then the premiums paid towards the policy will be paid back by the insurance company. Nonetheless, no more compensation is paid out to beneficiaries. It is a good idea to contact the insurer in order to know whether or not plans or policies cover death due to suicide. Understanding the terms and conditions while making claims regarding the same can only help you if you are a beneficiary or a policyholder.
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Occurrence of Death by Participation in Riots/Criminal Conduct
Plans of term insurance do not provide coverage for the death of the insured policyholder when they are involved in unlawful activities or even riots. The main purpose of term insurance is coverage for accidental and unforeseen deaths. Therefore, any involvement in criminal activity/riots results in claim rejections.
Conclusion
The purchase of term insurance can be explored and decided upon on a basis on which you get to compare the best plans and make a decision that suits you. However, term plan terms and conditions may seem ideal, but you must read them thoroughly so you know what you are getting into.
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