There are 8 major death cases which are not covered in term-life insurance. AssuredGain expert provide detailed information below.
Most people know that term-life insurance will give a lump sum death benefit to the nominee on the demise of the insured (policyholder), within the policy term. However, not many know that there certain types of death that are not covered by term-life insurance policies. So, if you have a term insurance or are planning to buy one it is essential for you to know which death cases are not covered in your term insurance policy. There are few insurers like LIC who issue term life with utmost scrutiny to avoid claim reputation. Most private players like ICICI have been warned for illegally rejecting claim by using fake medical certificate that the policy holder had preexisting disease.
1. Murder of the policyholder
Case 1: If the nominee is a criminal
The insurer will not settle the claim if the policyholder is murdered and investigations reveal the nominee was involved in the crime. The payout would be made only if murder charges are dropped or on an acquittal. The insurer withholds the payout indefinitely, till resolution of the case in favor of the nominee.”
Case 2: If death of policyholder was due to involvement in criminal activity
The insurer will not settle the claim if the policyholder is murdered due to his involvement in a criminal activity. No claim will be paid to the nominee if it is found that the policyholder was involved in some criminal activity. Death due to the involvement in any type of criminal activity as defined by the law will not be covered under the policy.
However, if policyholder has a criminal background i.e. he/she has a criminal record but dies due to any natural uncertainty, for instance, he/she dies because of some disease like swine flu, dengue, or lightning strike him/her, then in that case, the nominee will get the claim.
2. Death happens under the influence of alcohol
If policyholder’s death is due to driving under the influence of alcohol or narcotic substances, the insurer will reject the claim. Most insurers rarely issue life insurance policies to those who drink heavily or consume narcotic substances. If the policyholder had not disclosed these habits when availing the term insurance policy, the insurer will withhold the death benefit. If you consume alcohol you can avoid claim rejection by providing a correct declaration of history of alcohol consumption (type and quantity consumed) in the proposal form at the time of underwriting stage.
3. Not disclosing the habit of smoking
If you are a smoker, disclose the habit before availing the term insurance plan. Smokers may have a higher level of health risk and insurers add an additional amount (load) to the premium. Failure to disclose the habit of smoking could lead to denial of the claim if death was due to smoking-related complications. Therefore, you must avail term insurance only after going through the policy documents. Proper knowledge of the inclusions and exclusions of term insurance prevents disappointment during claim settlement.
4. Death by participating in hazardous activities
Death by participating in an adventure or hazardous activity is not covered by term insurance. These activities pose a threat to the life of the policyholder and may result in fatal accidents. “If you participate in adventure sports like car and bike racing, skydiving, paragliding, parachuting and hiking then you must disclose this when availing the policy. Failure to do so is considered as material misrepresentation and the insurer is not obliged to honor the claim.”
5. Death due to pre-existing health conditions
Death due to any condition that existed while availing the term insurance policy will not be settled by the insurer. There are a number of other death cases which are not covered under a regular term insurance policy. “Death due to self-inflicted injuries or hazardous activities, sexually transmitted diseases like HIV or AIDs, drug overdose, unless covered by a rider, are not settled by the insurer,” he said.
6. Death due to childbirth
If the death of the policyholder takes place due to pregnancy complications or childbirth, the insurer would not pay the sum assured to the nominee. At the time pregnancy, death occurring during the childbirth will not be covered in a term insurance policy.
7. Suicidal death
If the policyholder commits suicide within the first year of the policy term, then the nominee will not get the death benefit. However, most insurers provide suicide coverage from the second year onwards from the date of purchase of the policy, subject to terms and conditions.
8. Death due to natural disaster
If a policyholder with a term insurance plan dies due to a natural disaster such as an earthquake, or hurricane, then the nominee will not get the claim from the insurer. “Death due to natural calamities like earthquake, tsunami etc. are also not covered under the term insurance policy by most private insurer wheres LIC has given claim with liberal claim requirement.