The aim of an insurance plan is to provide financial security to an individual and their family in the event of unforeseen circumstances like injury, accident, theft, and any loss of property due to man-made or natural disasters. The protection offered depends on factors like the plan’s type and duration, the policyholder’s age, profession, and health history. Companies offering term insurance may have different yardsticks on what is covered or excluded from a plan.

What is a term insurance plan?

Term life insurance is one of the most popular and simple plans. While it is less expensive than whole life insurance, one has to pay a premium only for a fixed period. If the person insured passes away during the period, the benefits are given to the family or the nominee. A term insurance policy usually lasts 10 to 30 years.

Exclusions of insurance plan

While an insurance plan offers good financial coverage, its scope is limited, as the plan will cover only specific events or conditions listed in the plan. It will also provide coverage only up to the limit specified in the plan. The policy may also involve various exclusions. It is, therefore, important to know what is covered in an insurance plan and what is not. While some events or incidents can be added by paying additional amounts, many such perils cannot be added, even if the policyholder is willing to pay additional costs.

Where to find exclusions in a term insurance plan 

• The four major parts of an insurance contract are Declaration, Insurance Agreement, Exclusions, and Conditions.
• The declaration is the section that contains information about the company and the policyholder.
• The Insurance Agreement is the contract that provides information about the type of policy, amount of coverage, premium payable, duration of the policy, and the perils or events that are covered. Most companies provide a numbered list of the events and incidents for which a policyholder can claim reimbursement or compensation.
• Under Exclusions, one can find a comprehensive list of things not covered by the policy one plans to buy. The exclusions differ from one policy to another, and if an individual is buying multiple policies, it is important to check the list of exclusions for each policy.
• Under Conditions, the insurance company may provide multiple provisions for which the insurer must qualify to be eligible for claims. If the policyholder is unable to meet these conditions, the company has the right to deny their claim.

 What is  covered in a term insurance plan

The terminologies of an insurance policy can be complex. If an individual needs clarity about what is not covered in the policy, they can consult their insurance agent or dial the customer service agent. If they ignore this step, they might likely file a claim for an event, loss, or damage which is included in the exclusion list. There have been many instances where policyholders find out they are not eligible for claims only while submitting a claim, as the criteria come as a part of the exclusion list. It would also be too late to include it as an add-on. In the case of term insurance, it is usually the nominees or beneficiaries who sometimes find out that they are not eligible for the insurance plan’s benefits if the cause of the demise is not covered under the plan. A term insurance plan covers the following-

• Loss of life due to natural causes
• Unforeseen loss of life by accident or illness

What does a term insurance not cover

A term insurance company may reject a payout to the beneficiaries under the following situations-

Plan expiration before the policyholder passes away

If the policy expires before the policyholder’s demise, the company will not provide the cash benefit. To avoid this, the policyholder can renew the term policy for more time. However, the policyholder may not be able to pay the old premium, as the company may recalculate it based on the policyholder’s current age.

Unnatural loss of life

If the policyholder loses their life other than a natural cause,  and if there is evidence that the policyholder is involved in the incident, the company holds the right to deny payment of benefits to the beneficiaries.

Misrepresentation

If the insurance company finds out that the policyholder has withheld information or provided wrong details about themselves on their application, they can deny the benefits to the beneficiaries. 

Loss of life due to dangerous activity

If the policyholder passes by engaging in risky activities while the policy is still active, a term insurance plan will not cover it. Such activity could include risky sports activity. Term insurance will not provide benefits if loss of life is caused by activities like-

• Scuba diving
• Skydiving
• Bungee jumping
• Rock climbing
• Drag racing
• Recreational and non-commercial  piloting
• Mountaineering in high altitudes
• Professional sports activities with a high risk of injury

Loss of life caused by illegal activities

The insurance company will not provide cover and refuse benefits to the beneficiaries under a term insurance plan if they find out that the policyholder lost their life while engaging in illegal activities like-

• Robbery
• Arson
• Purchase and sale of banned substances
• Use of banned and illegal products
• Any other criminal activity