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Nuances of term insurance: Types of deaths not covered by typical life insurance policies

Dec 12, 2019 | 11 months ago | Read Time: 3 minutes | By iKnowledge Team
Types of Deaths that are not Covered by Typical Life Insurance Policies

While understanding life insurance plans can seem tricky, it is important to know your policy and its coverage inside and out to make sure you provide adequate coverage for you and your family. For most people term life insurance plans are the most feasible options, whereby, in the case of the death of a policyholder, the nominee receives the entire sum assured of the policy, in either a lump sum or in the form of monthly payouts as decided upon by the policyholder. In term plans, there is no added maturity benefit in the plan, which means that no benefits will be payable in case the policyholder survives the total duration of the policy. While term plans protect your finances in case of untimely demise, there are certain classifications which are not covered for term insurance death-benefits payout.

It is important to note here, that most term plans do offer coverage against accidental deaths. In such a case once a claim is filed and approved, the sum assured is paid to the nominee. Furthermore, if there is an accidental benefits rider added on to the plan, then the additional amount included in the plan is also added to the sum assured, given that it has been proved the death was an accident.

Here are some forms of deaths are not typically covered by life insurance policies:


For almost all term insurance plans one of the most standard exceptions to payout is a suicide clause, which means that if the policyholder commits suicide within the time-frame specified, the nominee is only entitled to get back the premiums of the policy, but will not receive any of the death benefit. As per the insurance regulator IRDAI (Insurance Regulatory and Development Authority of India), policies issued before January 1st, 2014, follow the old clause if the policyholder commits suicide after one year of the policy starting, the death benefit is compensated (term could vary from policy to policy).

Furthermore, for any policies issued after January 1st, 2014, the IRDAI mandates[1] that if the policyholder commits suicide within a year of obtaining the policy the nominee will receive full value of the policy (linked plans). These clauses vary from policy to policy, and when obtaining your life insurance, one must ensure to read through these minor details to fully understand the policy they are obtaining.

Death within first 2 years of policy

For any term life insurance plan if the death of the policy holder happens within the first two years of the policy being purchased, the cases are considered under Section 45 of the Insurance Act,[2] 1938 whereby the claim is investigated for fraud, including improper disclosure or even misrepresentation. However, after 2 years, no claim can be denied based on those grounds. The importance of being honest with your insurance company cannot be emphasized enough when we discuss the material misrepresentation clause, whereby, if you willingly withhold information from your insurance company about your lifestyle/health habits, your claim can be denied. This could include concealing information about having a hazardous job, pre-existing health condition, involvement in extreme sport, addiction to alcohol, smoking or drugs.

Other instances

Other instances whereby most term plans do not offer coverage is when the policy holder dies due to the overdose of a drug, due to an accident caused by drunk driving of the policyholder, overdose of non-prescription medication, or while committing any sort of crime or illegal activity. Similarly, if the policyholder dies as the result of a homicide, after the claim is filed, investigation is carried on along with the police department to ensure the beneficiary is not a suspect in the case. If in case the beneficiary is listed as a suspect, all payouts are held off until charges are dropped or until the nominee is acquitted of the crime.

While reading these factors can make it seem like buying life insurance is tricky and there are terms and conditions attached, it is important to know that the policy is designed to protect both you and the insurer from fraudulent activity. Insurance fraud which costs the industry over a billion dollars every year can be avoided by having such policies in place to protect both you and your finances. 





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