What are the things covered in term insurance?

A Term insurance provides financial protection to your family in case of any unfortunate eventuality. As a beneficiary, your wife, parents or children can receive a lump-sum death benefit in case of demise of the insured during the policy tenure. Even though term plans are among the most affordable and rewarding insurance options one can have, it is better to have complete knowledge about the kind of deaths that are covered under a policy, and also those that are not covered. It is always beneficial to be aware of the terms and conditions of the term insurance policy, to ensure there are no unpleasant surprises waiting for your family members or dependents, when they are already in stress. Term plans are best suitable for planning short to medium term goals. Let’s see what kinds of deaths are typically not covered in term insurance plans in India:

• Death due to driving under the influence of alcohol
• Death due to a pre-existing health condition
• Accidental death due to driving under the influence of drugs
• Death due to the participation in adventure sports
• Death due to the participation in racing events
• Death due to pregnancy and childbirth
• Death caused due to the participation in illegal activities

The above mentioned are certain lifestyle influenced exclusions in a term insurance policy. It is important that you mention about your smoking and drinking habits, if you happen to have them, at the time of application of the policy. Following which an insurance company will typically assess the risk of death due to these habits and may charge an additional premium for the cover. However, hiding the information can lead to problems at the time of claim settlement, causing trouble to your family. And in case the information is revealed after application, the company may cancel your policy.

Also Read - Term Plan Meaning

Apart from these previously mentioned pointers, there are some other conditions that are mostly not cover by a term policy:

• Self-inflicted injuries: If the cause of death is participation in a hazardous adventurous activity leading to self-inflicted injury, the claim might be rejected by the insurance company.
• HIV and AIDS: Insurance claims made against death due to sexually transmitted diseases like HIV or AIDS are not admissible by the insurance company.
• Natural disasters: Deaths that caused by natural disasters are not covered by the life insurance company. However, there are often riders available to cover these instances.
• Intoxication: Any death that takes place due to the consumption of drugs or alcohol is not admissible and the company has the right to reject its claim.
• Homicide: If the policyholder dies due to a murder, the insurance company has the right to put the claim on hold until the acquittal of the nominee. In case the murder is committed by the nominee, the insurance company will reject the death claim.

In cases where certain hazardous life conditions are predictable by the policy holder, insurance companies may offer riders and additional coverage options. It is advised you flourish all information at the time of buying of the policy. Also, if there is a change in lifestyle after allotment of the life insurance policy, the policyholder should ideally share the information with the insurance company to ensure efficient coverage and easy claim settlement, when the time comes.

Any natural death or death due to health-related issues will be covered by insurance plans in India. With critical illness covers, in case of death of the policyholder due to a critical illness or medical complication, the beneficiary will receive the sum assured as the death benefit. Most term plans also provide coverage in case of death of the insured due to an accident or disability caused by an accident. Moreover, term policies also offer the option of choosing from a variety of additional benefits that promise additional sum assured for specific uses like child education.

Death within First 2 Years of the Policy Term:

For any term life insurance plan, in case an unfortunate event takes place within the first two years of the policy term, the case is considered under Section 45 of the Insurance Act, 1938. It states that the claim will firstly be investigated for fraud, including improper disclosure of information or even misrepresentation. However, after 2 years no claim can be denied on the basis of these grounds. Therefore, the importance of being honest and presenting the correct information with your insurance company cannot be emphasized enough.

The iSelect Smart360 Term Plan by Canara HSBC Life Insurance is ideal for those who have big plans in life and need an insurance cover as flexible as their needs. The plan offers you flexibility to Increase you’re your cover aligned with changing life stages and protection needs at key life milestones, in addition to inbuilt benefits for Accidental Death, Child Support, and Accidental Total and Permanent Disability.

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A sudden death can place financial stress on those who depend on you. If this happens, life cover can help them pay the bills and other living expenses.

What is life cover

Life cover is also called 'term life insurance' or 'death cover'. It pays a lump sum amount of money when you die. The money goes to the people you nominate as beneficiaries on the policy. If you haven't named a beneficiary, the super trustee or your estate decides where the money goes.

Life cover may also come with terminal illness cover. This pays a lump sum if you're diagnosed with a terminal illness with a limited life expectancy.

Accidental death insurance is different from life cover. It will only pay out if you die from an accident. It will not provide cover if you die from an illness, disease or suicide. This type of cover often has a lot of exclusions.

To understand what's covered under a policy and the exclusions, read the product disclosure statement (PDS).

Decide if you need life cover

If you have a partner or dependents, life insurance can help repay debt and cover living costs if you die.

If you don’t have a partner, or people who depend on you financially, you may not need life cover. But consider getting trauma insurance, income protection insurance or total and permanent disability (TPD) insurance in case you get sick or injured.

How much life cover you might need

To decide how much life cover to get, consider how much money you or your family would:

• need — to pay the mortgage, credit cards and any other debts, child care, school fees and ongoing living expenses
• receive — from super, savings, the sale of any investments, your paid leave balance, and support from your extended family

The difference between these is the amount of cover you should get.

If you need help deciding if you need life cover, and how much, speak to a financial adviser.

How to buy life cover

Check if you already hold life insurance through super. Most super funds offer default life cover that's cheaper than buying it directly. You can increase your level of cover through your super fund if you need to.

You can also buy life cover from:

• a financial adviser
• an insurance broker
• an insurance company

Life cover can be bought on its own or packaged with trauma, TPD or income protection insurance. If it's packaged, your life cover may be reduced by any amount paid on other claims in the package. Check the PDS or ask your insurer.

Life cover premiums

You can generally choose to pay for life cover with either:

• stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age
• level premiums — charge a higher premium at the start of the policy, but changes to cost aren't based on your age so increases happen more slowly over time

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.

Compare life cover

Once you know how much life cover you need, shop around and compare:

• benefits and policy features
• exclusions
• waiting periods before you can claim
• limits on cover
• the cost of the premiums — now and in the future

A cheaper policy may have more exclusions, or it may become more expensive in the future. You can find information about the policy on the insurer's website or in the product disclosure statement (PDS).

What you need to tell your insurer

An insurer will ask you questions when you apply for or change your insurance. These questions may be about your: 

• age
• job
• medical history
• family history, such as a history of disease
• lifestyle (for example, if you're a smoker)
• high risk sports or hobbies (such as skydiving)

If an insurer doesn't ask for your medical history, it may mean that the policy has more exclusions or narrower policy definitions.

The information you provide will help the insurer to decide:

• if they should insure you
• how much your premiums will be
• terms and conditions for your policy

It is important that you answer the questions honestly. Providing misleading or incomplete answers could lead an insurer to cancel or vary your cover, or decline a claim you make.

Making a life cover claim

If someone close to you dies and you need to make a claim, or if you need to make a terminal illness claim, see how to make a life insurance claim.