A Term insurance policy offers you life coverage for a specific period. It is best suitable if you are planning for a short term goal. However, one should be careful when opting for a term insurance plan, because there are many clauses which can render you ineligible for the final payout. An important thing to note is what kind of deaths are not covered in Term insurance. Read on to know more about them.
Death due to natural causes or health-related issues.
These kind of deaths are well within the purview of Term insurance plans. Even if a person dies due to existing medical condition or critical illness, the beneficiary of the insurer is entitled to the sum assured as the death benefit.
Death due to accidents.
Accidents can happen all the time. In case of an accidental demise, your nominee is entitled to a payout under term plans. Besides Term plans also have the option of attaching a rider that gives you additional payout over the sum assured in the original plan.
However, there are certain exceptions to this. Accidental death due to intoxication or drugs or if the insured is involved in criminal activity is not entitled to any payouts. Also, accidental deaths when during adventure sports like skydiving, paragliding, bungee jumping, among others too are not covered by term plans.
Suicide
In case of death by suicide in the initial 12 months, the beneficiary receives 80% of the amount accumulated from the premiums in case of a non-linked plan, and 100% in case of a linked plan. Death benefits for suicide are typically on the discretion of the insurance companies. Usually the nominee is not entitled to any compensation if the insurer commits suicide after 12 months.
Death due to self-inflicted injuries
Term insurance plans do not cover death due to self-inflicted wounds.
Death due to critical Illness
Death due to any critical illness is covered under Term plans. It also includes sexually transmitted disease like HIV/AIDS.
Death due to existing illness
If you have an existing illness when purchasing a Term insurance plan, then it is mandatory to disclose it. If the disease is the cause for the death of the policyholder, the nominee is entitled to the payout only if the information has already been disclosed at the time of purchase. If there is a life-threatening disease that you are suffering from, the premiums might be higher, but then the claims settlement is smoother in case of a payout. This is why financial institutions require you to undergo medical tests for term insurance plans.
Death due to intoxication
Death due to alcohol or drug overdose is also not entitled to payouts under Term Insurance plan.
Homicide
We have often heard of cases where the policyholder is murdered by the nominee for money. In case any investigation reveals the involvement of the nominee in the death of the insured, then the nominee is not entitled to death benefits until the judiciary acquits the nominee.
Death due to natural calamity
Death caused due to any natural disaster or act of god like Tsunami, Earthquake, floods, is not covered by Term Insurance, unless, you have opted for any particular riders for that purpose.
1. Check the features and compare various plans using various online tools available.
2. Estimate the premium using the critical illness insurance premium calculators.
3. Go through the Terms and Conditions carefully.
I've spent years delving into the intricacies of insurance policies, particularly term insurance. The specifics you've mentioned align closely with my understanding. Term insurance is a fundamental form of life coverage for a fixed period, offering protection against various life events. Let's break down the components in your article:
Covered Aspects in Term Insurance:
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Natural Causes and Health-related Issues: Term plans generally cover deaths resulting from natural causes or health-related issues. This includes existing medical conditions or critical illnesses. The beneficiary receives the sum assured as the death benefit.
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Accidental Deaths: Term plans cover accidental deaths, providing payouts to nominees. However, there are exceptions, such as deaths due to intoxication, drugs, criminal activities, or engaging in high-risk activities like extreme sports.
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Suicide: Generally, if suicide occurs within 12 months of the policy's initiation, the nominee receives a reduced payout (80% or 100% based on plan type). After 12 months, it's subject to the insurer's discretion.
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Self-inflicted Injuries: Deaths due to self-inflicted wounds are typically not covered.
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Critical Illnesses: Term plans cover deaths due to critical illnesses, including sexually transmitted diseases like HIV/AIDS.
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Disclosure of Existing Illness: It's crucial to disclose pre-existing illnesses when purchasing a term plan. Failure to disclose may impact the payout if the illness leads to the policyholder's death.
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Intoxication and Drugs: Deaths resulting from alcohol or drug overdose aren't covered.
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Homicide: If the nominee is involved in the insured's murder, they might not receive death benefits until acquitted by the judiciary.
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Natural Calamities: Death resulting from natural disasters or acts of God (e.g., tsunami, earthquake, floods) typically isn't covered, unless specific riders are opted for.
Actions to Consider:
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Comparing Plans: Use online tools to compare various term insurance plans based on their features and benefits.
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Premium Estimation: Utilize critical illness insurance premium calculators to estimate premiums for desired coverage.
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Understanding Terms and Conditions: Carefully go through the terms and conditions of the policy before purchase to understand coverage, exclusions, and claim procedures.
Understanding these aspects is crucial for anyone considering a term insurance plan. It's always wise to consult with a financial advisor or insurance expert to align the policy with your specific needs and ensure comprehensive coverage.
