Term Insurance Coverage- Major Inclusions And Exclusions

Whenever you look to buy term insurance online, you should not take a hasty decision by all means. Why so? Term insurance comes with pure life coverage for a comparatively reasonable premium than other life insurance plans. However, it also has several inclusions and exclusions that you should consider. For example, some types of death do not have coverage under term insurance. Noting these exclusions at the outset will help avoid any future issues.

The inclusions in a term policy pertain to its core premise. The family members or nominees will receive a lump sum payout upon the demise of the insured individual within the policy tenure. It covers all natural and other causes of death with a few exclusions. Here is a closer look at the same.

Deaths not covered by term insurance

Term insurance does not offer coverage for the following types of deaths. They are usually exclusions within the policy document. They include the following:

  • Death by suicide- Most insurers do not offer coverage for death by suicide in the first year of the insurance policy. However, in any case of death by suicide within the first 12 months from the date of revival or commencement of coverage, the nominee will have eligibility to receive a minimum of 80% of the basic premium paid by the insured individual till the date of death or the surrender value on the aforementioned date.
  • Death due to self-inflicted injuries- In case of death due to self-inflicted injuries or activities which are hazardous for the self, insurance companies will reject claims made by the nominees.
  • Death due to driving under the influence of alcohol or drugs- Insurance companies will reject claims filed by nominees if the policyholder died due to driving under the influence of alcohol or drugs. Term insurance policies do not usually obtain approval for those with chronic alcoholism or drug usage habits. No death benefits are applicable if the policyholder refrains from disclosing these lifestyle habits while buying the policy.
  • Death due to non-declared pre-existing ailment- If the demise happens due to a pre-existing disease that has not been disclosed to the insurer, then the company has every right to reject claims.
  • Death arising from participation in illegal actions- There are two distinct situations to understand in this category. If the nominee is found guilty of murdering the policyholder or has any involvement in the crime, then the insurer will reject the claim payout. If the nominee is innocent, the company will pay the claim amount. If the demise was due to involvement in any illegal or criminal action, then the insurer will not settle the claim made by the nominee. However, if the policyholder, while having a criminal record, dies due to any other natural cause, then the nominee will get the sum assured amount.

Now that you know of the exclusions, here is a closer look at the usual inclusions in a term insurance policy.

Deaths covered by term insurance

Some of the deaths covered by term insurance policies include the following:

  • Death due to health issues or natural causes- If policyholders pass away due to natural causes or health issues later in life, the sum assured amount is paid to the nominee.
  • Death due to medical illness- The demise of policyholders upon contracting any disease or medical illness like kidney failure is also covered by insurance companies.
  • Accidental Death- If the policyholder passes away due to an accident, the insurance company will pay the claim amount to the nominee. Some policies also have additional riders for accidental death benefits where an additional sum assured amount is paid to the nominee over and above the original sum assured. Yet, the exclusions in this category include accidents under the influence of drugs or alcohol, death due to adventure activities like racing, parachuting, bungee jumping, and so on, and death arising from involvement in any illegal or criminal activity.
  • Deaths due to natural calamities- Insurers also offer coverage for the nominees in case of the policyholder’s death due to any natural calamity like a tsunami, earthquake, lightning, and so on.

While buying a term insurance policy, browse through the list of inclusions and exclusions. The sum assured is not paid out in some general cases as well. These include the insured person outliving the policy period, errors in the application form for the claim, lapses of policies due to non-payment, any fraud or misrepresentation while enrolling for the policy, death due to war, and similar scenarios, death due to sexually transmitted diseases, and also death due to pregnancy, childbirth, or any related issues.

Look up all these aspects carefully when you invest in a term insurance plan. Also, use a term insurance premium calculator to understand how much you will have to pay for your desired coverage.