Know common exclusions in life insurance policies

There are numerous circumstances wherein your insurer may reject your claim. Here is a rundown of common exclusions under a life insurance cover that one needs to know.

Mumbai: Life insurance is no doubt one of the most effective ways to ensure that your family stays protected even when you are not around. Should you suddenly pass away due to an accident or illness; your life insurance policy will pay the total sum assured to the beneficiaries without any worry about taxes or delays related to probate.

Apart from protecting your family against any difficult circumstances, it even provides them with financial stability as long as it is required. However, along with the benefits comes certain terms and conditions, and not reading them carefully while buying the policy may lead to rejection of your claim.

There are numerous circumstances wherein your insurer may reject your claim. Here is a rundown of common exclusions under a life insurance cover that one needs to know.

Not declaring pre-existing diseases

While buying term insurance, it is very important to disclose your insurer about any pre-existing disease and your smoking and drinking habits. Doing this will not only help you get the right cover but will also minimise the chances of your claim being rejected filled for the same disease.

Disclosing the pre-existing disease helps the insurers to assess the related risk and decide on the right premium for you. It is wise to present your medical history in the case asked by the insurer.

Suicide or self-inflicted injuries

Life insurance policy excludes death claims due to suicide. As per the policy terms, the payout will not be made if the insured commits suicide within one year of the policy commencement.

After the first year, the policy will pay for suicidal death, unless there is another provision or exclusion specifically outlined in the policy wordings that forbid it.

Also, in some cases, the insurers may pay back all or partial premiums to the beneficiary paid by the policyholder till the date of the death subsequent to deducting policy related expenses, if any.

For instance, under HDFC’s Term Insurance plan, if the policyholder commits suicide within 12 months from the date of the start of the policy term, the beneficiary only gets 80% of the premiums paid.

Involvement in life-threatening adventurous activities

Adventure activities like river rafting, paragliding, skiing and many more are getting quite popular among the Indians. However, all such thrilling sports and activities are considered unsafe and are excluded from the policy.

While buying term insurance, one must know that death occurred due to participation in any kind of adventure activity will not be covered under the term plan.

Intoxication

As per the WHO report, on average, alcohol kills around 2.6 lakh Indians every year. The deaths usually occur due to liver cirrhosis, cancer or death due to drunk driving. Under a term insurance policy, if the death of the policyholder happens due to consumption of drugs or alcohol, the insurer has every right to reject the death claim.

In the case of drug overdose, the payout completely depends upon a number of factors such as the type of drug being taken and whether the policyholder was prescribed under a registered medical practitioner. However, it is important to disclose all this information on your application form while buying a policy.

Illegal activities

Acts which are performed on purpose and violate the law also fall under the policy exclusions. If the death of policyholder occurs while committing a crime or taking part in any illegal activity, the insurance company can refuse the pay-out.

For instance, if the policyholder gets killed in a police encounter while committing a crime, the insurer has every right of denying the claim. Under any insurance policy, no death benefit is paid if the life insured is involved in a criminal or unlawful act or committing any breach of law with criminal intent.

(Written by Santosh Agarwal, Associate Director- Life Insurance, Policybazaar.com)