One of the most important financial products that should be a part of any good portfolio is a life insurance policy. Buying this product is all the more important when you are the primary breadwinner of the family. Life insurance plans ensure that, if an unfortunate event were to strike you, your family does not have to suffer major financial losses.
Like with other kinds of insurance plans, a life insurance policy, too, has its lists of inclusions and exclusions. Even though most insurers aim to provide comprehensive coverage to their policyholders, they may not be able to cover all kinds of deaths. Before you buy a life plan, you must know what kinds of deaths are commonly covered and which may be excluded.We provide a list of the same.
Coverage of life insurance
- Death by natural causes
This is the primary coverage provided by all term insurance policies. If the policyholder passes away due to natural causes, then the family members receive the death benefit amount. This benefit is determined by the premium you pay. To create the right balance between the premium and the sum assured, one must use a life insurance premium calculator.
- Death due to health-related reasons
If the policyholder passes away due to a health condition, then, too, the death benefit is provided. One must read the policy wordings carefully to check the waiting period for certain diseases. In the event of a pre-existing disease, the insurer may have a waiting period of a few years before the coverage kicks in.
- Death due to suicide (conditional)
If the demise has occurred as a result of the policyholder committing suicide within one year of the beginning of the policy, then a certain portion of the sum assured is provided to the nominees. If the suicide occurs post one year, the nominees can receive the full sum assured amount.
However, not all life insurance plans cover deaths due to suicide. It is always advisable to read the policy wordings carefully to gain clarity on this matter.
- Death due to an accident
Deaths caused as a result of accidents are also covered by most life insurance policies. The manner in which the accident was caused is also taken into consideration. For instance, if the accident occurred as a result of alcohol intoxication, the claim can be rejected, and the life cover amount withheld.
Additional coverage provided by add-ons
You can increase the level of financial coverage by opting for life insurance rider plans at the cost of an extra premium. Some popular rider plans include:
- Critical illness rider
If the insured person is diagnosed with a critical illness covered by the policy, they receive a benefit amount as prescribed in the policy. The benefit amount may differ as per the severity and type of the critical illness.
- Accidental death benefit rider
Even though accidental death is already covered by the base policy, this rider provides an additional benefit amount on top of the sum assured.
- Accidental total permanent disability rider
If an accident leads to a total permanent disability, then this rider provides a benefit amount to the insured members. The amount from these life insurance rider plans can help the insured members deal with the financial problems that may occur as a result of a lack of employment or regular income.
Common life insurance exclusions
- Death due to criminal activity
If the insured person has passed away as a result of involvement in criminal activities, then the claim for compensation can be easily rejected.
This includes not just the participation of the insured member, but also any criminal action of the beneficiary towards the insured.
- Death due to alcohol/substance abuse
If the death of the policyholder is traced to alcohol or substance abuse, then the insurer is entitled to reject any claims arising from the same.
- Death due to excluded diseases
Some diseases are not covered by most life insurance plans. For instance, severe mental illnesses may not be included. Furthermore, diseases such as HIV/AIDS may not be covered as well.
Also, note that adding riders to your plan may also lead to a small hike in your premium. You can get an estimate of the same with the help of a life insurance premium calculator.
For a detailed list of inclusions and exclusions present in your policy, you should read the policy wordings carefully. If you have any doubts regarding the same, do not hesitate to reach out to your insurer.