Term Insurance 1110 views January 21, 2019

Types of Deaths are Not Covered in a Term Insurance

Types of Deaths Are Not Covered In Term Insurance

Death is an inevitable part of life. The grief of losing a loved one coupled with financial uncertainty due to the resulting loss of income is hard to explain. While the feeling of loss cannot be lessened, having term insurance in place ensures that financial expenses of the dependents are taken care of without causing a dampening effect on their existing lifestyle.

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Deaths Excluded Under Term Insurance

However, not all deaths qualify under the term insurance cover. While a term insurance plan ensures the much-needed protection in the event of sudden and unfortunate death, not all kinds of deaths are covered under term insurance cover. The kinds and nature of deaths that are excluded under the current set of norms proposed by the IRDAI (Insurance Regulatory and Development Authority of India) are:-

Death By Homicide

Greed for money or financial benefits has caused many killings in the past. This resulted in the IRDAI pass a resolution stating that if the policyholder is killed by the nominee(s), then the insurance company has the right to reject the death payout(s) or withhold the amount till the nominee is acquitted of the charges levied. This rule has been put in place to protect policyholders from the selfish desire of nominee(s) for money. Term insurance is bought not to create wealth, but to secure the lives of dependent(s) against the possible loss of income on death.

Death By Suicide

Suicidal deaths are becoming common. To ease the claim settlement process for the nominee(s) in case of suicidal death by the policyholder, the IRDAI introduced some changes in the suicide clause from January 01, 2014. This means that policies bought before 2014 will adhere to the rules laid down before that year while the new suicide regulations will apply to term insurance plans bought after 2014.

Suicide Regulations For Policies Bought Before January 01, 2014

The regulations clearly state “If the policyholder commits suicide within one year from the date on which the policy has been bought or the date on which the policy has been revived, the policy will be deemed null and void, and hence, no claim would be paid by the insurance company.” This rule would be in effect irrespective of the fact whether the policyholder had lost his sanity at the time of committing suicide.

However, some insurance companies had introduced a longer waiting period of two years or more. It is important that the customers read the terms and conditions of the policy before signing on the dotted line as the waiting period mentioned in the policy proposal would be come into play at the time of claim settlement.

Suicide Clause For Policies Bought After January 01, 2014

The rules governing claim settlement on the policyholder’s suicide are now different and adhere to the guidelines passed by the IRDAI in 2014. If the policyholder who has bought market-linked plans has committed suicide within a year of the policy inception, then the nominee (as mentioned in the policy document) will receive the entire amount of fund value.

The nominee(s) of policyholders holding non-linked plans, and having committed suicide within 12 months of the policy inception, will receive only 80 percent of the premiums paid as claim settlement.

Though the concept of term insurance remains essentially the same for all, insurance companies selling these policies may have different terms and conditions. To ensure hassle-free claim settlement, it is important that customers read the terms and conditions of the policies bought before agreeing to pay for them.

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