Types of Deaths Included under Term Plans

The primary purpose of investing in any life insurance policy is to shield your family’s economic well-being in case anything unfortunate happens to you. It is advisable to invest in term life insurance, as it one of the most popular products available in the market today. Read on to know more about what is term plan.

A term plan is a pure and simple type of life insurance product that only provides life cover for a specific duration. A high sum assured and affordable premium are two factors that make it a favored product among policyholders. While investing in a term plan, you need to consider factors, like the premium, policy tenure, and the sum assured. Additionally, you need to know the forms of deaths included in the policy, as you cannot jeopardize your family’s financial safety during your absence.

It is crucial to understand the specific kinds of deaths that term insurance providers cover. Also, you will have to make a note of the types of demises that need an extra rider for additional protection. Here are some of the deaths that are included in term life insurance:

  • Natural death

Natural death due to any medical condition or disease is covered by all insurance companies. For instance, if the demise of the policyholder occurs due to a heart attack or stroke, the term plan takes care of it, as the death happened due to a health issue. Here, the nominees of the policyholder will get the sum assured from the insurer.

  • Accidental death

Deaths caused by a mishap like a road accident are covered under a term plan. Here, the insurer will pay the death benefit to the policyholder’s nominees. However, the insurer can reject the claim if the policyholder was under the influence of alcohol or drugs, or was involved in racing, which led to his or her demise.

  • Homicide

Death due to murder is covered under term insurance plans. However, insurance companies have a contestability period of two years, wherein they have time to investigate the exact reason for the death. It is to ensure that the terms of the agreement are not violated. Here, the objective is to protect insurance companies from any insurance-related fraud or dishonest customers, which can result in losses for them. Also, if the nominee is accused of murdering the policyholder, the insurer can withhold the death benefit until he is proven innocent in the court of law or if the charges are dropped against him.

  • Suicide

Insurance companies cover the death due to suicide only if the policyholder ends his or her life within one year from the date of purchase of the policy. As per the latest amendments made by the Insurance Regulatory and Development Authority of India in July 2019, the nominee is entitled to receive up to 80% of the total premium paid or the surrender value till the date of the policyholder’s suicide, whichever amount is more. Do note that this is applicable for non-linked policies. On the other hand, the nominees of linked insurance policies can receive up to 100% of the total premium paid till the date of death.

  • Natural disaster

Even though it is an accidental and unforeseen death, usually, insurance companies do not offer coverage in case of demise due to a natural disaster. However, if the policyholder has opted for a rider that covers a demise caused due to tsunami, floods, or extreme weather conditions, then the insurer may provide the death benefit.

Now that you have clarity about the forms of deaths that your term plan covers, remember these and educate your nominees about the same. Today, numerous insurance providers offer term plans, and you need to make a wise choice. For this purpose, you can seek the help of a term insurance plan calculator to compare the various premiums, the sum assured, and other aspects. This online tool will help you to invest in an ideal policy that can secure your family’s financial future.