One of the main reasons why people buy term insurance plans is to secure the financial future of their family ones in case of their untimely demise. Under the terms of this plan, the insurance company promises a fixed amount of money (called the sum assured) to the policyholder’s nominee (also known as the beneficiary) in case the life assured (policyholder) dies during the course of the policy tenure. The beneficiaries can file a claim after the death of the policyholder to receive the sum assured. However, not all deaths are equal. You should know about the different types of death covered and not covered under a term plan –
Types of Death Covered Under a Term Plan
Death By Accident
Majority of life insurance companies honor the term insurance claim if the policyholder dies due to an unfortunate accident. Many term plans offer add-ons to cover these accidents that will enhance the coverage amount. You even get the sum assured in case the policyholder suffers from permanent/long-term disability due to the accident.
However, not all types of “death by accidents” qualify.
If the life assured was found to be under the influence of alcohol, drugs or any other intoxicating substances at the time of the accident, then the insurance company considers the contract void and will not provide any relief to the beneficiaries. If the life assured was found to be involved in some criminal activity, or was participating in extreme sports (such as paragliding, rock climbing, bull-fighting etc.) at the time of his/her death, the claim can get rejected.
Death due to old age, or succumbing to any critical illnesses are covered under term insurance plans.
Types of Deaths Not Covered In a Term Insurance Plan
A life insurance company will not honor a term life insurance claim in case the policyholder commits suicide. However, certain life insurance companies give back 80% of the premiums paid so far by the policyholder (applicable only in case of unlinked plans) or 100% of the premiums paid so far by the policyholder (applicable only in case of linked plans) to the nominee if the policyholder commits suicide within 12 months of buying the term plan.
Death During Natural Calamities
It is rare for a life insurance company to provide a term insurance rider for death due to natural calamities. Majority of life insurance companies do not include a “death due to tsunami, earthquake, floods, cyclones, hurricanes or any other natural calamities” clause in their contract.
Overdose of prescription
The death of the life insured due to an overdose of prescription drugs or alcohol is not covered under term insurance plans.
Death Due To HIV/AIDS
Life insurance companies are not liable to pay the death benefit if the life assured dies by contracting sexually transmitted diseases such as HIV/AIDS.
Before purchasing a term plan, go through the various terms and conditions associated with the plan and check if you’re eligible to receive the various term insurance benefits. It is recommended that you choose to invest in a term plan that covers maximum eventualities at the lowest prices.