The financial security of the family members is the top-most priority for any individual. An ideal way to secure the financial future of your loved ones, especially in your absence, is by investing in life insurance plans.

In the event of your death, the insurer pays a lump sum amount to beneficiaries of the policies. The amount received can be used by your dependents as and when needed. 

However, there are many types of life insurance products available in the market, and each has a few exceptions to it. The policy exclusions are explicitly mentioned in the documentation, and one needs to go through it thoroughly before purchasing the life cover. 

Common Exclusions in Life Insurance Policies

• Whether the death is by suicide

Life insurance plans, such as term insurance, are known to provide death benefits to the beneficiaries of the policies in the event of your untimely demise. Let us consider an example for better understanding.

Mr Ghosh purchased a life insurance policy in his 20s. Due to the recent economic situation, he is unable to cope up with the financial stress and decides to end his life by choice. Now, the life insurance policy should pay a lump sum amount to his dependents. However, death by suicide is not covered under any life insurance policies available in the market. Hence, the beneficiaries of the said policy will not receive any benefit in the event of Ghosh’s death.

The court is liable to make an ultimate decision on whether the death is by suicide or not. At first, the medical experts will examine the cause of death and issue a death certificate. The beneficiary has to submit the certificate when raising a claim request. 

Upon receiving the death certificate, the insurer will carry out an investigation. Based on the outcome of the investigation, the life insurance claim is denied in case the death is due to suicide. 

• Exclusions in accidental death benefit rider

In case the death of the insured is due to unnatural cause, the insurer will investigate the case extensively before settling the claim request. Each insurer is equipped with a team of medical experts to investigate the cause of death. 

If the beneficiaries are raising a claim based on the rider benefits opted by the insured – critical illness or accidental death benefit – the sum assured will not be paid if the death is caused due to:

• Death due to consumption of alcohol or drugs
• In the case of a war-like event
• In case the insured participated in dangerous sport or activity
• In case the insured is involved in criminal activities
• In the case of pregnancy, childbirth, or complications arising from the same
• In case the death is due to a pre-existing disease

When the accidental death benefit is opted, the insurer will pay the sum assured to the beneficiaries in the event the insured dies in an accident. However, if the accident occurs due to the influence of alcohol, drugs, or participation in a racing event, the insurer is liable to reject the claims made under the same.

It is also important to note that you have to pay an additional life insurance premium amount when opting for rider benefits on your life insurance plan. 

• Exclusions if the death is due to lifestyle diseases

 If the death of the insured is due to lifestyle habits/diseases, such as excessive smoking habit, then the insurer is liable to deny the claim request. This is because the insured had concealed the said information. 

Ideally, life insurance providers classify people with lifestyle disease as high-risk applicants. Therefore, the premiums charged to them are high as well. You can use a life insurance premium calculator to determine the premium amount on your chosen coverage based on your lifestyle habits.

The Bottom Line

When buying life insurance products in India, it is imperative to understand the exclusions of the policy in detail. In addition, the beneficiaries of the policy should be well versed with the claim settlement process, as you will not be around to help them with it.