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Terms of Inclusion and Exclusion of Different Life Insurance Policies

  6/13/23 3:50 AM

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A life insurance policy is a legally enforceable contract between the insurer and the insured. In it, the insurance company promises to cover the policyholder’s life for a defined period. Life insurance claims can be made when the life insured dies and their beneficiary claims the sum assured. Following the completion of the internal formalities, the insurer pays the sum assured to the nominee as specified in the policy. Isn't it straightforward?

However, in some cases, things do not work in this simple and straightforward manner, and the insurer may deny your claims. As a result, the insured and his or her nominees must thoroughly understand the terms and conditions (also known as exclusions) of the life insurance plan as stated in the policy document.

This means that there are certain clauses and rules governing this contract. There are certain situations in which an insurer can decline the claim, and there are certain clauses that decide what you can do with the policy. When it comes to life insurance plans, each insurer has its own set of terms and conditions. However, some generic exclusions apply to nearly every insurer and plan. Here, we will understand the various clauses and exclusions that govern the policy. But first, let us understand some basic features of life insurance policies:


1. Suicide Claim

A claim for death owing to suicide is not admitted within 12 months to 2 years of the date of inception of the policy. This means that death due to suicide will not be covered for the first 1 or 2 years of the policy. Edelweiss Tokio Life Zindagi PlusMyLife+ starts covering suicide claims 12 months after the inception of the policy. Still, suppose the Policyholder dies by suicide within 12 months of the date of risk commencement or the date of Revival of the Policy, as applicable. In that case, the Nominee or Beneficiary is entitled to at least 80% of the Total Premiums Paid till the date of death or the Early Exit Value available as of the date of death, whichever is greater, provided the Policy is In-Force...

However, in case the insured commits suicide during the exclusion period, 80 % of the premiums paid are returned to the family members depending on certain conditions. Generally, a suicide clause or suicide cover is included in term insurance policies first. And it is applicable only after 12 months or 24 months after the issuance, depending upon the terms and conditions.

2. Grace Period

If you have not paid the premium due, your policy will remain in force for 30 days from the premium due date. This is called the grace period. If the premiums remain unpaid after the completion of the grace period, the policy shall lapse. The benefits of the policy will continue depending on the deduction of the due premiums and are subject to terms and conditions.

3. Nomination

The policyholder can nominate anyone as the beneficiary to receive the benefits of the policy on his death. This nomination can be made and changed at any time during the policy term. There is no restriction on the number of times this can be changed.

4. Assignment

On a specific request by the policyholder, the rights bestowed in the policy may be assigned to another person. This is called the assignment of the policy.

Now we can move on to understand the common exclusions of a life insurance policy.

Exclusions in case of an Accidental Death

Although accidental death is covered by a life insurance policy, the insurance company may defer the claim in a few cases. In the event of an accidental death claim, every insurance company typically investigates the death from beginning to end and has a designated team of healthcare professionals for the process.

The investigation procedure may differ from one insurance company to the next.

Habits and Way of Life

Causes of death can vary, and insurers must ensure that beneficiaries are entitled to death benefits if a policyholder dies unexpectedly. Insurers require information about a policyholder's habits and lifestyle, which could be the cause of death, before purchasing any life insurance product. This information is useful to insurers in the event of a death caused by any of these habits, namely alcohol consumption, smoking, or intoxicant consumption. To put it simply, policyholders who fall into these categories of habits are considered high-risk applicants in comparison to those who do not.

As a result, policyholders with such habits may be able to obtain life insurance, but they will have to pay higher premiums in accordance with the terms and conditions of the insurance plan. Insurers may also honour or reject a claim in the event of the policyholder's death based on this information. If the policyholder withheld information about lifestyle habits, the claim will almost certainly be denied.

Narcotic consumption or intoxication

This point is similar to the previous one, with a slight distinction. The insurer is not obligated to compensate the beneficiaries if the death of the life insured is caused by the use of drugs or alcohol.

Sexually Transmitted Disease

If the insured's death is caused by STDs (Sexually Transmitted Diseases) such as AIDS, HIV, or other sexually transmitted diseases, the insurance provider will deny any claim for the same.

Previous Medical Conditions

In general, waiting periods for various critical illnesses are assigned to all life insurance plans before they can be covered. Ideally, the waiting period should last between 3 months and 4 years.

Death as a result of criminal activities or riots

Life insurance policies do not cover risks associated with illegal activities or riots.

The purpose of any type of life insurance policy is to cover unexpected and accidental risks. As a result, participation in such activities demonstrates the policyholder's willingness to be exposed to greater risks.

Conclusion: Read the policy document!

You must carefully read the policy document at the time of purchase. Exclusions are common in most life insurance policies. While it is critical to understand the benefits, it is also critical to understand the exclusions. When making your decision, make certain that your plan covers the majority of the major risks and has minimal exclusions. Exclusions are typically stated clearly in a life insurance policy.


Siddhant Dubey - Writer & Photographer

Siddhant works as a freelance content writer who is interested in a wide range of spheres from photography and personal finance to cooking. He is also an aspiring photographer striving to showcase life around him through his vision. 

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