Rejection of a Life Insurance claim can be a huge financial setback. Here’s a list of common exclusions of Life Insurance that you need to look out for.
Imagine saving up for a vacation to a country for years only to be denied a traveller’s visa at the last minute? Leaves you feeling downright bitter and helpless, doesn’t it? You can end up in the same sorry state if you’ve been paying premiums on your Life Insurance policy without knowing what the policy exclusions are.
Reading a policy carefully before deciding to buy it, however, should be the order of the day. Uncertain about the exclusions under your insurance policy? You can always check with your insurance advisor for these details. Before buying a policy, enquire about the exclusions. If you’re purchasing a critical illness cover, the exclusions are all the more important.
What are exclusions?
Exclusions are circumstances or events that don’t fall under the scope of a Life Insurance policy if it results in the death of the insured person. Let us understand this better with the help of an example. Suppose an individual gets a Life Insurance policy and then commits suicide. As per the policy, the sum assured in the Life Insurance policy should be paid to the nominee on the death the policyholder’s death. However, a suicide is an exclusion in a Life Insurance policy.
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Here is a list of exclusions that don’t fall under the scope of a Life Insurance policy:
There’s no insurance for risks arising from man-made disasters as they affect several policyholders at the same time. Wars and riots that are man-made are cases in point.
Intentional acts that are in violation of the law like criminal activities fall under policy exclusions. The policy considers that by participating in such acts, one is knowingly getting into a situation which may harm the persons involved.
Before signing up for an insurance policy, you will encounter questions pertaining to your smoking and drinking habits. Insurance companies believe that the chances of smokers dying are far more likely than non-smokers. This ups the chances of smokers making Life Insurance claims much more than non-smokers. This way they charge higher premiums for smokers than non-smokers.
At the time of buying insurance, if the policyholder withholds this piece of information and passes away, the insurance company can deny the claim if they come to know that the death took place owing to a smoking-related disease. The same applies to one’s drinking habit. The policyholder needs to inform the company about a drinking habit at the time of applying for the policy. This helps the insurance company assess the risk and take a call on the appropriate premium amount for cases like these.
Suicide and self-inflicted injury:
Suicide as a cause of death figures in every term plan’s list of exclusions. The policyholder’s nominees will not receive the insurance claim money and benefits if the policyholder commits suicide within one year of the start of the policy. The normative in these cases, usually, is that a medical expert will attempt to determine the cause of death and issue a death certificate. This certificate must be submitted to the insurance company by the beneficiary in order to make a claim. On receipt of the death certificate, the insurance company does an investigation. In the event that the cause of death was suicide, the claim will be denied. This is irrespective of whether the life insured is sane or insane. Group insurance plans also include a suicide exclusions clause.
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Insurance covers risks for situations which are accidental in nature. Activities where the policyholder is aware of the risks and is getting into the act knowingly like rock climbing, auto racing, bungee jumping, skydiving, etc. are not covered.
Air accident covers exclude aerial adventure sports like parachuting and skydiving.
HIV or sexually-transmitted diseases:
A claim may be denied for a policyholder who dies of HIV or any sexually transmitted disease.
Illegal drugs or abuse of medicine dosage:
Insurance companies will also deny claims arising out of a policyholder’s death owing to consumption or use of intoxicating drugs/alcohol/solvent or abuse of medicine dosage other than the prescribed limit by a registered doctor will be denied.
Additional Reading: When Buying Life Insurance, Always Buy Term Plan First
Exclusions in Accidental Death Benefit Rider:
If a death occurs due to unnatural circumstances, a thorough investigation will be done by the insurance company to assess the validity of the claim. Insurance companies have their own team of medical experts who examine the veracity of such insurance claims. The sum assured is not paid in case of pregnancy-related deaths or childbirth complications arising from it.
While purchasing a Life Insurance policy, it’s imperative to read the fine print of terms and conditions. Your sudden death may be a great financial blow to your family. But a rejected death claim could be financially crippling. It might take more effort than usual to go through the terms and conditions. However, it’s still worth knowing what your policy covers and does not.
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News About Life Insurance
Recently, in a landmark ruling while hearing the Shanbaug case, the Supreme Court recognised the right of a person to die with dignity. The ruling allowed individuals to execute a ‘living will’, and the right to refuse medical treatment if they contract a terminal illness. With the development being relatively new, insurance companies in India are yet to arrive at a consensus on whether such cases warrant compensation under an insurance policy. Generally, insurers don’t pay for suicides. However, in light of special cases such as these, the IRDA is mulling provisions keeping in mind best practices from around the world that will help insurers decide on appropriate actions and compensation.