What Is Excluded Under A Term Insurance Policy?
Published On Feb 04, 2022 11:30 AM By InsuranceDekho
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Term Insurance is essentially a contract between two parties – the life insurer and the life assured – wherein the former provides life cover to the latter in exchange for a cost known as premiums. In case the life insured passes away before the stipulated policy expiry date, their nominee or beneficiary will be entitled to receive the sum assured payout. However, term Insurance is, after all, a business where profits and losses can make or break a company. Every insurer, in order to minimize their losses, has laid down a list of exclusions which are basically events/circumstances, and their consequences which will not be covered under the policy. If an insured dies under unclear circumstances, then it is the duty of the insurer to investigate the cause of death in detail to rule out foul play and also determine whether the death was caused due to an event or circumstance which the policy doesn’t cover.
There are several instances or events which are not covered by term Insurance. Let us find out what these are.
List of General Exclusions In A Term Insurance Policy
Here's a list of the exclusions that are listed in a term Insurance plan:
You may have noticed that insurance policies mention dangerous or adventure activities under exclusions. This is because of the high life risk that these activities are associated with, as a result of which they will not be covered. This exclusion will usually include adventure sports like skydiving, paragliding, rock climbing, scuba diving, vehicle racing, hang gliding, and other such adrenaline-pumping adventure sports.
Usually, term Insurance policies may not cover death caused due to pregnancy or pregnancy-related complications.
Another standard exclusion in term Insurance is death due to a pre-existing disease. Pre-existing diseases are diseases which the insured has been suffering from at the time of applying for the policy, or prior to cover commencement. These are usually not covered by term Insurance.
Most often, death in an air crash wherein the insured was traveling on a private airplane, will not be covered by an insurance policy. However, if the insured has died while traveling with a commercial airline which follows a set schedule and routes, the insurer may pay out the death benefit.
Participation in criminal/illegal acts
No insurance policy, sold by any insurer, will provide cover for the risk posed due to participation in illegal/criminal/unlawful activities. This is one of the standard exclusions of every term Insurance policy. This can include activities like driving under the influence of alcohol, consumption of intoxicants like drugs or alcohol, injury or death caused due to a car accident wherein the insured was not wearing a seat belt or was speeding, participation in illegal protests, etc. no insurer will pay or entertain a claim wherein the insured’s death has been caused due to an illegal or unlawful activity.
This is another standard exclusion in a term insurance policy which may be far less common in older days than it is now. As per this clause, if the insured has died due to a war act or any war-related activity, then the death benefit will not be paid out.
Death due to suicide is an event which most life insurers will not cover, especially if the same has taken place within a period of 2 years, starting from the policy commencement date. In such cases, the death benefit might not be paid at all, but depending on the policy details, the nominee may get equal to or more than 80% of the total premiums paid for the policy till death. This refund of premium will be provided based on the terms and conditions of the policy.
Considering all that has been mentioned above, one can draw the conclusion that insurance is not something that must be taken lightly. It is a tool which will ensure the financial safety and well-being of your loved ones especially at a time of misfortune. Therefore, it is important for every buyer to read their policy document carefully and understand what it offers thoroughly.
Also read - 6 Reasons You Should Have A Life Insurance Policy
Types of Deaths Not covered under term plans
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.