Types of Deaths Covered and Not Covered by Term Insurance

However, some cases can lead to claim rejection. Therefore, if you have a term insurance plan or are planning to buy one, it is important to know the types of deaths covered and not covered in term insurance.

Let’s discuss what kinds of deaths are not covered under term insurance:

Death due to Suicide

Most insurance companies in India do not cover death by suicide in the first year of term insurance policy. It is important to check the exclusions and inclusions of the plan through the plan’s brochure before purchasing a plan.

In case of death because of suicide within 12 months from the date of commencement of risk under the plan or the policy’s revival date, the beneficiary/nominee of the policyholder shall be eligible for at least 80% of the total basic premium paid by the policyholder till the death date or the surrender value available as on the date of death provided the policy is in force.

*The T&Cs of exclusion might vary from insurer to insurer. Refer company’s brochure. 

Self-Inflicted Injuries

In case the assured's death happens due to self-inflicted injuries or hazardous activity, the claim made by the beneficiary will be rejected by the insurance company.

Death due to driving under the drugs/alcohol influence

The insurer rejects the claim if the policyholder's death is because of driving when drunk or under the influence of a substance. Term plans are commonly not offered by insurers to drug users or heavy drinkers. The company would not give any death benefit if the policyholder failed to disclose all these habits while buying the term plan.

Deaths due to pre-existing diseases not declared

If the life assured dies because of a pre-existing health condition they may have had before buying the term plan and did not disclose. In such cases, the insurance company has the right to reject the claim. 

Death caused because of participation in illegal activities

There are mainly 2 possible scenarios in this case which are:

• If the beneficiary/nominee is criminal: If the policyholder is murdered and later it is discovered that the nominee was also involved in the crime, the insurance company will not pay the claim amount. Until the nominee is proven guilty, the insurer will always reject giving the payment.

• If the policyholder’s death was because of the involvement in criminal activity: If the policyholder is killed because of his/her engagement in any illegal activity, the term insurer will not pay the claim amount. However, if the life assured has a criminal track record but dies because of a natural calamity like lightning, flu, or dengue, the nominee will receive the claim amount.

Let’s discuss what kind of deaths are covered in term insurance:

Death because of natural causes or health-related problems

Natural death or death caused by health-related issues is covered by term insurance plans. If the policyholder dies due to any critical illness or medical condition, the policy's beneficiary will get the Sum Assured as the death benefit.

Deaths arising from medical illness 

If a policyholder dies because of a disease or medical illness such as kidney failure, such deaths are also generally covered by a term insurance plan.

Accidental Demise

Term plans also provide coverage in case the insured dies due to an accident such as a motor vehicle accident, fire injury, electric shock, drowning in a river, etc. Moreover, many term life insurance plans come with an additional accidental death benefit rider under which an extra sum assured is paid to the beneficiary of the policy along with the Basic Sum Assured in case of accidental demise of the insured person.

However, there are certain exceptions to this. The death of the insurance holder under the influence of alcohol or any type of drug while driving or due to involvement in any type of criminal activity leads to claim rejection. Moreover, life insurance plans also exclude the death of an individual due to involvement in adventure sports like skydiving, parachuting, rafting, bungee jumping, etc.

Deaths due to COVID-19

With the increasing pandemics worldwide, various term insurance seekers wonder whether a term insurance plan would involve coverage for the disease. Term plans offer coverage for death occurring because of COVID, provided an individual contracts the disease after buying the policy and not before.

Tsunami or Natural Calamity

Generally, the term insurance plan provides coverage to the insured's family in case of the insured person's demise due to a tsunami or any other natural calamity like lightning, weather conditions, earthquake, etc. Subsequently, the policy's beneficiary receives the Sum Assured amount as a death benefit from the insurance company.

*The T&Cs of exclusion might vary from insurer to insurer. Refer company’s brochure. 

The Bottom Line

Before purchasing a term life plan, insurance buyers need to review the policy documentation. Having proper knowledge of both inclusions and exclusions of the policy can help the policyholder avail the coverage and prevent any type of discrepancy during the claim processing.

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