Term Insurance Policy: Find details of Death Cases that are not covered in it
Term Insurance Policy: Today the world has been on that edge of time where having a term insurance policy has become a necessity.
Today the world has been on that edge of time where having a term insurance policy has become a necessity. Proper financial planning is the need of the hour. Term insurance is the most affordable and easily available means of securing the future of loved ones. It has become the most popular option among the masses for providing financial protection to one's family by getting oneself insured.
In case the unforeseeable happens to the insured, i.e., the family has to face the demise of the insured individual, then the insurance company will have to pay the death benefit to the family. This death benefit will be the amount for which the policyholder has been insured.
For instance, if the policyholder gets himself/herself insured for Rs 75 lakhs by availing the term insurance policy for up to the age of 75 years, but before the term of 75 years ends, the family has to face the unfortunate death of the insured. In that case, the family or the nominee mentioned in the documents is entitled to Rs 75 lakhs death benefit which the insurance company is bound to pay after following necessary required procedure.
Even though availing the term insurance policy is an appropriate option of taking financial care of the family, the individual or the policyholder is strictly advised to go through the documents and contract carefully before purchasing the term insurance plan. There are certain death conditions in the term insurance policy which the company covers and does not cover. Here is a list of death conditions that are not covered under the term policy:
♦ If pre-existing medical conditions are the cause of death: If the death of the policyholder or the insured occurs due to pre-existing medical conditions then the nominee is not entitled to claim the death benefit amount of the policy. Pre-existing medical conditions, which are not disclosed by the person to be insured at the time of availing the term insurance policy makes the claim invalid. These include sexually transmitted diseases (STD) such as AIDS (Acquired Immune Deficiency Syndrome) or HIV (Human Immune-deficiency Virus).
Drug overdose, self-inflicted injuries or hazardous activities are also on the list. Unless these are covered by a rider the claim will not be settled. Rider refers to an additional premium that is paid along with the regular premium to cover these pre-existing medical conditions.
♦ If the policyholder does not disclose the habit of smoking: The policyholder should disclose the habit of smoking to the company at the time of signing the contract. Otherwise, the claim will be declared as null and void. This is due to the reason that smokers are subject to higher health risk. This risk will be covered by the insurer only after the policyholder agrees to pay an additional premium along with the regular premium.
If the policyholder fails to disclose the habit of smoking at the time of making a contract with the company and death happens due to smoking-related complications, this may lead to denial by the company to settle the claim. Therefore at the time of availing the service of term insurance, the candidate must read the documents carefully to prevent any kind of disappointment at the time of settling the claim with the company.
♦ If the policyholder participates in hazardous activities and loses a life: The insurer does not cover participation by the insured in adventurous and hazardous activities for claiming death benefit amount at the time of maturity of the term insurance policy. Participating in these type of activities pose a threat to the life of the insured and may lead to fatal accidents.
If the insured participates in adventure activities such as car races, hiking, paragliding, bungee jumping, parachuting etc then these activities should be reported at the time of availing the policy. In case of failure to disclose this will be considered as a breach of contract and the insurer will not honour the claim settlement.
♦ If the insured commits suicide: If suicide in the first 12 months of the term of the policy becomes the reason for an insurance claim, it will not be settled by the insurer. This means that the nominee is not entitled to claim the amount of settlement of the policy. However, under certain term and conditions, some insurance companies cover suicidal cases from second year onwards from the date of purchase of the term insurance policy.
♦ If death occurs under the influence of alcohol: The occurrence of death under the influence of alcohol or narcotic substances faces a clear rejection for death benefit claim amount by the nominee from the insurance company. That is, the insurer has no liability to transfer the claim amount of the term insurance to the nominee.
Drinking alcohol heavily and facing an accidental death under its influence is a clear case of drunk driving. In this case, the insurance company rejects the claim of the beneficiary. Most companies rarely issue insurance policies to heavy drinkers or consumers of narcotic substances.
If the policyholder has failed to disclose the drinking habit at the time of buying the policy, the claim gets rejected on maturity. One needs to give a written declaration to the company about the history of alcohol consumption along with the correct amount of alcohol consumed and time intervals at which it is consumed. This needs to be mentioned in the proposal form at the time of underwriting stage.
♦ If the insured faces death due to natural calamities: Natural calamities or disasters such as earthquakes, tsunamis, hurricanes etc. are very much unpredictable. No one knows exactly about the place and time of its occurrence. And if the policyholder faces death due to any of these unforeseen events the nominee is entitled to get nothing as a claim from the insurance company. Death due to any of these happenings are not covered by the term insurance plan.
♦ If death occurs while giving birth to a child: Death occurrence while giving birth to a baby faces a clear rejection of the death benefit claim by the insurance company. This means that if the insured individual loses life due to pregnancy-related complication issues then the nominee's claim for the insured amount shall be rejected by the insurer. Death due to pregnancy-related issues is not covered by the term insurance policy.
♦ If the policyholder gets murdered: We have two cases to discuss here if the policyholder gets murdered and the nominee claims the death benefit amount from the insurance company.
a) If the policyholder or the insured individual dies due to involvement in criminal activity: The insurance company is not entitled to pay any death benefit claim to the nominee if it finds out that involvement of the insured individual in any kind of criminal activity has resulted in his/her death. In this case, the nominee is in no position to claim the insurance amount from the company.
However, if the policyholder dies due to natural uncertainty like dengue, swine flu or struck by lightning and still has a criminal background the company shall settle the claim with the beneficiary. Criminal background here refers to the involvement of the insured in any previous criminal activity and has a case registered against him/her in the court of law.
b) If the nominee is a criminal: The term insurance policy claim will not be settled by the insurance company if in case the insured individual gets murdered and the investigations reveal that the nominee of the policy was involved in the crime. The company can withhold the death benefit claim amount for whatever the period it takes.
If the legal case against the nominee is dropped or the nominee gets acquitted by the court of law in that case the nominee can file for the claim settlement with the insurance company. But till that time the death settlement claim amount will be withheld by the insurance company.