When you’re shopping for life insurance you want to know what is and isn’t covered. Especially when it comes to the most important aspect of the policy, death. If your friend or loved one unfortunately passes away you’re going to want to know the ins and outs of the policy guidelines and exclusions.
Term life insurance plans are the most common options, when it comes to choosing a life insurance policy. In the unfortunate event the policy holder dies, the beneficiary receives the entire sum insured within the policy. This can be either a lump sum or in the form of monthly payouts. This is decided by the policyholder. In term life insurance, there is not an added maturity benefit in the plan. What this means is that no benefits will be payable in case the policyholder survives the total duration of the policy. Term life insurance will protect your finances in case of untimely demise, but there are certain situations where you will not be covered within term insurance death-benefits payouts.
Most term life insurance policies do offer coverage against accidental deaths. In such a case once a claim is filed and approved, the sum assured is paid to the beneficiary. You will have the option to add an accidental benefits rider ‘added on’ to the policy. By doing this the additional amount included in the plan is also added to the sum assured, this would all take place if the death is ultimately determined to be an accident.
Below we go over 5 types of death that are not typically covered in a standard term life insurance policy;
1. Suicide
The majority of term insurance policies have a suicide clause. This means that if the policyholder commits suicide within the time-frame specified, the beneficiary is only entitled to get back the premiums of the policy, and won’t receive any of the death benefit from the policy. These clauses vary from policy to policy, and when obtaining your life insurance, please make sure to read through these minor details so you fully understand the policy you’re purchasing.
2. The first 2 years of policy
For most term life insurance policies if the policy holder dies within the first two years of the policy being purchased, the cases are considered under Section 45 of the Insurance Act, in this instance the claim is investigated for fraud. This includes false disclosure and misrepresentation. After 2 years, a claim may not be denied based on those grounds. We can’t stress the importance of being honest with your insurance company enough. The material misrepresentation clause, states if you willingly withhold information from your insurance company about your lifestyle or health habits, there’s a good chance your claim can be denied. For example if you conceal information about having a hazardous job, a pre-existing health condition you have, if you’re involved in extreme sports, have an addiction to alcohol, smoking or drugs. In short, please be honest with your insurance company, it can help reduce the chance of a claim be rejected.
3. HIV / AIDS
Most insurance companies will not pay out a claim if the policy holders death is caused by a sexually transmitted disease. People living with HIV may find it super difficult, if not impossible to find life insurance coverage. HIV is viewed the same way most other chronic diseases are by life insurance companies.
While it may be difficult to obtain term life insurance coverage, there are a handful of insurance companies that offer whole life insurance policies to people living with HIV. Obviously with different guidelines and rules than a normal whole life policy.
4. Death by Intoxication
If the policy holder happens to pass away by the unfortunate event of an overdose caused from drugs or alcohol, there is a good chance the insurance company will not pay out that claim. You may be thinking a drug overdose would be considered an ‘accidental death’. As most policies state, accidental death benefits are not payable when the death occurs due to the result of taking drugs or medications that are not prescribed to the policy holder.
Most term life insurance policies won’t cover an overdose where the policy holder knowingly used illegal drugs. Some overdoses are the result of an improperly prescribed medication. Other examples are an accidental overdose of a pharmaceutical painkiller or similar sedative-type medications. For cases like this, there’s a good chance that the claim will be covered as an accidental death. The chance of the claim getting approved increases if the deceased was in the care of medical professionals at the time of the overdose.
5. Death by Homicide
This ones pretty obvious, especially if you’ve ever watched the TV show Snapped. If the policy holder is murdered by the beneficiary, there’s a really good chance the insurance company will reject the claim. This of course would come after a full investigation that reveals the beneficiary as being involved in the insured demise.
Wrapping up; what we named here are only a handful of the reasons an insurance claim can be rejected. You’re going to want to learn as much as you can about your policy before purchasing it. The easiest way to do this is by speaking to one of agents. [click here to call an agent now]