Which Death Is Not Covered in Term Insurance?

Did you know? In the fiscal year of 2022, life insurance penetration in India reached approximately 3%, whereas non-life insurance penetration was notably lower at just one per cent.

The above statistics definitely suggest the lack of insurance awareness in India. Speaking of that, let me share how important term life insurance is. It provides peace of mind, offering financial security to families and loved ones in times of need.

But exactly, what is term insurance?

It is a fundamental form of life insurance that provides financial security to your loved ones in your absence. It offers a pure death benefit, meaning it pays out a lump sum to the beneficiary if the insured person passes away during the policy term.

But are all term plans suitable for you? Which is the best term plan in India?

In order to choose the best term plan, pay attention to factors such as:

• Coverage amount
• Premium affordability
• Term length
• Alignment of the policy with individual financial goals and responsibilities
• The various exclusions in term insurance

Exclusions in Term Insurance

In terms of insurance, some specific exclusions play a crucial role in delineating the boundaries of policy coverage. Here are mentioned some of the health conditions that are not covered by term insurance policies:

Common Exclusions:

Suicide: Most term insurance policies include a suicide exclusion clause, which limits payouts if the policyholder takes their own life, especially within the initial policy years. This provision prevents the misuse of insurance during distressing times.

War or Terrorism: Deaths resulting from acts of war or terrorism may not be eligible for coverage. This safeguards insurers from risks beyond their control and outside the scope of their underwriting.

Criminal Activities: Coverage may be void if the policyholder's death results from engaging in criminal activities, discouraging claims arising from illegal actions.

Intoxication: Instances involving death while under the influence of alcohol or drugs may be excluded, preventing insurers from compensating for reckless behaviour.

Additional Exclusions:

• Getting involved in high-risk activities, such as skydiving, could result in exclusion from coverage due to the elevated risks involved.
• Occupations that inherently carry risks, such as mining or logging, may lead to limited coverage or higher premiums to account for the increased level of risk.

Now that you know about the various exclusions, let’s discuss:

Suicide Clause and Contestability Period

When you invest in life insurance, you acquire financial security for your chosen beneficiary in the event of your passing. However, if you happen to pass away shortly after procuring the policy, particularly during the contestability period, certain conditions come into play:

The contestability period (usually 2 years) becomes relevant if the insurance provider discovers deliberate misrepresentations in your initial application. For instance, if you have intentionally attached a diagnosis of your chronic diabetes, the insurer may have the option to decline or reduce the death benefit payout.

Many individuals tend to conflate the contestability period with the suicide clause, but it's essential to understand that they are separate provisions. The suicide clause stipulates that if the policyholder takes their own life within the initial two years of the policy, the life insurance company will not disburse the death benefit and will refund the premiums paid. However, if suicide occurs after this initial two-year period, the insurer must provide the death benefit.

Choosing the Best Term Plan

Choose the right insurer:

• Assess the Claim-Settlement Ratio: Assess the claim-settlement ratio and solvency ratio of the insurance company. For instance, HDFC Life Insurance offers a Claim Ratio of 99.39% in the year 2022-23.
• Verify the Solvency Ratio: Evaluate the solvency ratio of insurance companies to ensure their ability to fulfil financial obligations. The solvency ratio should meet the IRDAI's minimum requirement of 1.5. Access the solvency ratio information online.

Determine your Needs: Calculate the premium you might need to pay using the term insurance calculator.

Evaluate Benefits: Compare policy benefits to find plans offering superior advantages. Look for policies with maturity benefits, flexible payment options, and varied payout choices.

Opt for Riders: Explore additional riders with term plans, such as critical illness and accidental disability coverage. These riders provide extra financial security during challenging times for you and your loved ones.

Seek Flexible Payout Options: Consider term insurance plans that offer flexible payout options aligned with your financial goals. Monthly payouts can be more manageable for your nominee, assisting them with immediate financial needs.

Research Online Availability: Ensure your insurer offers online and offline availability. Check if they have 24x7 chat features on their website for quick query resolution.

Conclusion

Understanding the nuances of insurance, especially term life insurance, is crucial for making informed decisions that provide financial security and peace of mind for policyholders and their beneficiaries. Hence, it is essential to choose the right plan by considering factors like coverage, affordability, and exclusions. Researching insurers, evaluating benefits, and opting for riders can ensure a well-informed decision for lasting financial protection. So, why delay any longer? Choose the best term plan in India today!

Information Source- agentcode=00760655&source=G_C2_C2S_Adwords_Search_BrandT_High_Priority_RSA_Google_kwd

https://www.investopedia.com/ask/answers/08/term-life-insurance.asp

https://indialends.com/life-insurance/contestability-period-in-life-insurance