Know the Types of Deaths Not Covered Under Term Plans
Term plans are popular due to their simplicity and affordability. These are pure life policies that pay the benefits to your nominees if an unfortunate event occurs during its duration. Most term plans do not offer any survival or maturity benefits, which is why the premiums for such policies are lower than traditional life plans.
Various insurance companies offer different term plans, and it is important to research and compare these options. You need to know about the plan’s inclusions and exclusions, additional riders that are available, premium, and duration. This will help you in making an informed decision.
Now that you understand the term insurance meaning, know that this policy does not cover not all forms of deaths. Here are five such situations:
- Murder
If one or more of the nominees are involved in your sudden absence, the insurance company will not pay the benefits. The insurer withholds the policy benefits until the nominees are acquitted or the charges are dropped against them.
If your absence results as a consequence of your involvement in an illegal activity, the insurer may not pay the benefits to your nominees. However, even if you are involved in unlawful activities but your absence occurs due to a natural cause, the insurer pays the policy benefits to your nominees.
- Under the influence
If an accident occurs that results in fatal consequences, and if you are driving under the influence of drugs or alcohol, your nominees will not get the benefits. Most insurers do not offer life cover if you abuse any drugs or are an alcoholic. If you hide this information at the time of purchasing the policy, the insurer will reject the claim in the future.
- Withholding information related to the smoking habit
If you smoke regularly, it is vital that you disclose this information when you are buying the policy. As the risk of a potential claim is greater for smokers, the premium is higher, and you can use a term plan premium calculator to know the approximate amount before purchasing the policy. You must carefully read the policy document to understand the inclusions and exclusions. If your absence is due to smoking and you did not share this information with the insurer while buying the policy, your nominees may not receive the policy benefits.
- Pre-existing diseases (PEDs)
If you have any PEDs, it is essential to provide the relevant information to the insurer while purchasing the policy. Most insurers do not cover PEDs for a certain period and may charge a higher premium to insure you in this case. You can use an online term plan premium calculator to know the approximate increase when compared to buying a policy when you do not have any PED.
- Participating in hazardous activities
If you meet with an accident while participating in activities like paragliding, racing, skydiving, and hiking, which results in your untimely absence, the insurer may not pay the policy benefits to your nominees. Such activities can cause possible fatal accidents, and if you do not disclose information of engaging in life-threatening sports, the insurer is not obliged to pay the claim if an untoward incident occurs.
Most people check only what is included in the online term policy, but often overlook the exclusions. The primary objective of buying term insurance is to ensure the financial stability of your family when you are not there to provide for them. If the benefits are not paid due to an oversight, this motive is lost. Therefore, do your research and read the policy document in detail before you purchase it. Make it a point to buy a term plan from a reputed and reliable insurer that has a higher claim settlement ratio. Doing this will ensure that your loved ones do not face monetary difficulties if you are absent in the future.