An insurance contract will promise to pay out the sum assured when the premium is paid by the policyholder and an insured event occurs during the contract’s term.
However, to minimize losses, the insurance companies talk about exclusions in the cover which they offer. Exclusions can be defined as events and conditions which are not covered by the insurance policy.
Let’s understand this with a real-life scenario. An individual may decide to purchase a life insurance policy and then suddenly choose to end his life by committing suicide. As per the policy, the nominee should be paid out the sum assured in the event of the policyholder’s death.
However, a suicide, in particular, is not insured. Suicide is usually an exclusion in a life insurance policy. All life insurance companies do not pay out the sum assured when death takes place by suicide within the first year of the policy term.
Determining Whether a Questionable Death is Suicide
The courts will make the ultimate decision whether the death is by suicide or not. Initially, a medical expert will try to determine the cause of death and issue a death certificate.
The beneficiary needs to submit this certificate to the insurance company when making a claim. After receiving the death certificate, the insurance company will carry out an investigation.
The claim is denied if the cause of death is suicide, irrespective of whether the life insured is sane or insane.
Exclusions in Accidental Death Benefit Rider
If death occurs under unnatural circumstances, the insurance company will investigate the case extensively before settling the claim.
Each insurance company will follow its own investigation procedure and is equipped with a team of medical professionals who will investigate the death claim.
In the case of Critical Illness or Accidental Death Benefit, sum assured is not paid if death is caused by:
- Consumption of alcohol or drugs
- In the event of war
- When taking part in a racing activity or a hazardous activity
- When taking part in an act which is criminal in nature
- In case of pregnancy or childbirth or complications which arise from it
- In case of death owing to a pre-existing illness.
Some exclusions are applicable on the riders which come with a life insurance policy. Under accident disability riders, the life insurance companies makes the promise to pay out sum assured in case the life assured loses his life in an untoward accident.
But, if the fatal accident happens when the insured is under the influence of alcohol or while taking part in a car-racing event, the insurance policy will not pay out the sum assured.
Exclusions in the Event of Death Occurring from Lifestyle Diseases
In the case of death which happens due to a lifestyle disease such as excessive smoking, the insurance claim may be denied on the basis that the insured has concealed information from the insurer.
Smokers are likely to succumb to lifestyle diseases and are categorized in a higher risk pool. They are, therefore, charged higher premiums.
Why Reading the Policy is Important
Hence it is important that you read the policy with a lot of care. Most life insurance plans will have certain exclusions. While it is important to know the benefits it is crucial that you also understand the exclusions.
Take note of the fact that death by terrorist attacks is also not covered by most of the plans.
When you make your selection, you must ensure that your plan covers most of the major risks and has minimum exclusions. Exclusions are generally clearly stated in a life insurance policy.
When you buy a policy enquire about the exclusions. For complete clarity, it is necessary that you read the fine print.
If not done, you may face a claim rejection. If you are considering buying a critical illness cover, the exclusions are all the more important.