Life Related Critical Questions Addressed by Term Insurance
We all know getting life insurance is crucial. It provides financial support and covers for your dependents in case of an unfortunate event that leads to death. Term insurance is a solution that safeguards against fatal risks.
Life term insurance provides coverage for a predetermined period. This is how it differs from a complete life insurance policy. Under term insurance, the policyholder is insured only for a fixed term. The nominees can file a claim if the insured passes away in this time frame.
But what are the risks that are covered under the best term plan? What are the critical questions that the term insurance plan addresses? It is imperative to answer these questions before selecting a term plan for yourself. Let us go through some of these:
What causes of death are covered under term insurance?
The term insurance plans cover deaths due to natural causes and health-related issues. It also covers critical and life-threatening illnesses. However, a separate rider for critical illness must be opted for.
As stated above, the claim is only valid if the insured dies within the term period. Moreover, declaration of any health problem is a must at the time of purchasing the policy. Smoking habits are also something that must be told beforehand. It may lead to a higher premium, but it reduces the risk of rejection of the claim. The insurer also conducts medical exams to verify the health conditions before finalising the policy.
Deaths due to accidents are also covered. Accidents can happen at any time and with anyone. Providing a cover against such risk becomes important. However, certain conditions apply in such a scenario.
Death by suicide is also now covered under term insurance plans. Some provisions must be complied with to calculate the amount of payout.
What kind of deaths are not covered by term insurance?
For any insurance policy, prudence by the insured is necessary. The policyholder must act rationally and not create situations to gain benefit from insurance policies. In the case of term insurance, the same rule applies. Term insurance policies do not cover deaths due to self-inflicted injuries. Moreover, it is also mandatory to disclose any underlying diseases at the time of purchasing the term plan. If any such information is left out, your claim can be rejected.
Death during childbirth is also not included in term insurance policies. Any claim for a payout will be rejected.
Deaths in cases where the insured was intoxicated or under the influence of prohibited substances are not included. It is so because such behaviour is regarded as a criminal activity.
In case of death due to war or terrorist attacks, the insurer is not liable to pay. However, the beneficiaries may file a claim on humanitarian grounds.
There are also cases where beneficiaries try to take advantage of the policy payout. If the nominee or beneficiary is found to be involved in the death of the insured, the claim is rejected. Proper investigation is undertaken to ensure such scenarios do not occur.
Does term insurance provide cover for accidental death?
In case of accidents, coverage is provided by term insurance. However, certain conditions must be met. The insured should not be under the influence of drugs or alcohol when the accident takes place.
Also, accidents due to exposure to nuclear or chemical radiation do not come under the purview of the policy.
Accidents due to adventure sports, such as skydiving and mountaineering, are not included either.
Is death by suicide covered under the term insurance plan?
Death by suicide is covered under term insurance, however, it is subjected to certain restrictions. If the death occurs within the first 12 months of taking the policy, then a certain percentage of the premium paid is receivable. For a link plan, this is 100% of the premium, but for a non-link plan, it is only 80%.
The insurance companies decide the death benefits as per their own policies. In most cases, nothing can be claimed if the insured commits suicide after 12 months of taking the policy.
Are separate provisions required for death due to natural calamities?
Under the basic term plans, death due to natural calamities is not covered. These include floods, earthquakes, cyclones, and other such disasters. However, there are provisions to opt for special riders. These riders provide additional coverage under these situations. It will enable the beneficiaries to file a claim in case of the death of the insured due to natural calamities.
Having all this information is necessary for the policyholder as well as the beneficiaries. It is the beneficiary who files the claim on the death of the insured. Not knowing all the facts can lead to mental as well as financial stress when a claim is rejected. So make sure you go through all details. Communicate the intricacies of all cases to everyone involved with the term insurance policy.