No matter how much an individual trusts his pilot, he would still want parachutes in his plane, in case of emergencies. While he will hope that he won't need it, nonetheless, we all know that it's wiser to have the parachutes on board. Simply put, it imparts confidence to the passengers that should things go wrong, they are protected.
term insurance like a parachute for the insured's life. Optimistically, one should never have to claim the same, but if the worst were to happen, at least one’s family will have a financial cushion to protect themselves from the financial consequences of his/her death.
Claims in a term insurance can be availed when the life insured passes away and his beneficiary claims the sum assured. After the internal formalities have been completed, the insurer pays the sum assured to the nominee as prescribed in the policy. Seems pretty simple, isn’t it?
However, there are certain scenarios wherein things don’t work in this simple and straightforward manner and the insurer might deny your claims. This is why the insured and his nominees need to thoroughly understand the terms & conditions (read as exclusions) of the term insurance plan as given in the policy document.
Every insurer has its own set of terms & conditions when it comes to term insurance plans. However, there are some generic exclusions that are applicable across almost every insurer and plan. Below mentioned are some of these exclusions:
Your premium is decided on age at which you buy the policy and remains same, throughout your life
Premiums can increase between 4-8% each year after your Birthday
Your policy application could be rejected or premiums increase by 50-100%, if you develop a lifestyle disease
Although, accidental death is covered in a term insurance policy, there might be few cases wherein the insurance company might defer the claim. Usually, in case of an accidental death claim every insurance company investigates the death from its end and generally has a designated team of healthcare professionals for the process.
The investigation procedure might differ from one insurance provider to another one.
Almost every insurance provider confirms the smoking habits of the insured beforehand. This piece of information is really crucial as it comes in handy if the insured passes away due to a lifestyle issue.
Simply put, smokers have lower mortality rates when compared to non-smokers and that’s why the latter are generally put in the high-risk category, which adversely impacts their premium rates, too.
Thus, insurance providers have the right to deny the claim if the policyholder dies due to smoking and has failed to mention the same at the time of filling the proposal from.
There are certain exclusions for term insurance plans that are not covered at all:
If the death of the insured is caused by a self-inflicted injury or participating in life-threatening sports without taking complete precautions, the claim won’t be accepted.
Additionally, suicide is almost always on every term insurance policy’s exclusions list. If the policyholder commits suicide within one year of purchasing the policy, no compensation will be paid to his family.
However, there are some insurance providers that return the entire premium paid by the insurer after deducting the medical & administrative expenses and any other expenses mentioned in the policy.
If the death of the life insured is caused by consumption of drugs or alcohol, the insurer is not liable to compensate the beneficiaries.
If the insured’s death is caused by STDs (Sexually Transmitted Diseases) such as AIDS, HIV, etc., it isn’t covered under the term insurance plans and any claim made for the same will be rejected by the insurance provider.
Generally, all term insurance plans are assigned waiting periods for different critical illnesses before they can be covered. Ideally, the waiting period is spans something between 3 months to 4 years.
Term insurance policies don’t cover risks that arise from participation in illegal activities or riots.
The nature of term insurance or any other life insurance policy is to cover risks that are unexpected and accidental. Therefore, involvement in such activities proves the policyholder’s intent to be exposed to greater risks.
In the end, not paying attention to the terms & conditions might lead to claim denial in the long run, which is definitely not what you want. The whole point of insurance is to provide a sum assured to your loved ones to take care of their future. To lose this sum assured is unwise and counter-productive as you lose your premium amount as well.
Therefore, it is really crucial that you understand the features and benefits of a term insurance plan thoroughly. Even though, it’s a bit tedious to go through every mentioned exclusion (or inclusion) line by line, the effort put in the initial phase will definitely help family members at the time of claim submission.