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Types of Death Covered in Term Insurance

By Admin
07 June 2022, 4:58 PM
types of death covered in term insurance

Term insurance is one of the best methods for the protection of yourself and your family from any unprecedented financial crisis. It is the oldest form of life insurance by which your nominee would be able to obtain the sum assured on your demise. When you are purchasing a term insurance policy, you are in turn purchasing the mental peace and financial security for your family.

However, term insurance cannot be considered as an investment since the premium paid will be used in covering the insurance cost. So, the policyholders of term insurance policy do not obtain a share in the profits that are earned on investments. The premiums for term insurance are the lowest among all other types of life insurance plans.

What are the Types of Death Covered Under Term Insurance?

The main categories of death which are covered under the Term Insurance can be listed below:-

Natural Death or Death Caused due to Medical Conditions

Term Insurance plans provide cover for deaths that are caused due to any kind of health-related problems or natural death. The death could have been caused as a result of any sudden medical ailments which would lead to the death of the policyholder. In this case, the sum assured of the term insurance plan would be paid to the nominee of the policyholder. Also, for instance, if the policyholder suffers from any diseases or gets ill which can, later on, lead to his death then it would be a case of death due to medical condition.

In case, a policyholder would die all of a sudden while sleeping then this state is considered as a natural death. 

Death Caused due to Accidents

Term insurance plans also provide cover for the deaths that are caused due to accidents. Accidental death can be said to be an involuntary or unforeseen event which occurs due to any visible and violent force. Many term insurance plans also offer the benefit of accidental death benefit riders. By this rider, if the death of the policyholder occurs due to an accident, the rider sum assured is paid to the policyholder’s beneficiary along with the sum assured of a basic term plan.

But, there are certain exceptions to the cover that is provided by term insurance plans. If the death of the policyholder occurs under the influence of any drug/ alcohol during driving or due to any involvement in any kind of criminal acts can cause claim rejection of term insurance plans. Furthermore, if the death of a policyholder occurs due to being involved in adventure sports such as rafting, skydiving, parachuting, racing, etc. then it could also be considered as an exclusion for a term insurance plan.

Let us consider an example such as Lata has a term insurance plan which has a sum assured of INR 25 lakh and she has also opted for an accidental death benefit rider of INR 25 lakh  that will offer an additional payout on death caused due to an accident. One day while returning back from work, Lata meets with an accident and is admitted into the hospital. Her condition deteriorates and despite very good health care facilities Lata could not survive.

There was a huge medical bill which included many test reports, fees of the surgeon, hospitalisation bills and other expenses which amounted to around INR 15 lakh. Lata’s family claimed term insurance on the demise of Lata and the insurance provider paid around INR 50 lakh as the death was an accidental death. This amount included the basic sum assured and the accidental death benefit. By this, her family would be able to pay-off the huge medical bills and can also maintain their lifestyle as she was the single earning member in the family.

Other Examples of Accidental Death

Let us check out some other examples of accidental death cases.

  1. Death caused due to fire and injuries caused to fire accident
  2. Death caused due to drowning in the river
  3. Death caused because of slipping in the bathroom
  4. Death caused due to any kind of electric shock
  5. Death caused due to an accident that occurs because of the involvement of motor vehicles
  6. Death caused due to falling from any building or rooftop

Conclusion

So, different insurance companies have different clauses associated with the death benefit. It is advisable for policyholders to go through the policy document properly, understand the clauses in detail to avoid any discrepancy at the time of processing the insurance claims.

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