The concept of life insurance is simple. The policyholder pays a premium each year and when he dies, the family receives the claim amount. But, what if the policyholder is murdered? Surely it adds to the complications in the claims settlement process.
Delhi-based Narendra Singh (name changed) was going home in a cab when he had a heated argument with the cab driver. One thing led to another and the cab driver strangled him. The driver claimed that Singh was drunk and used abusive language. Based on his statement in the police chargesheet, the insurance company rejected the insurance claim, saying the deceased was under the influence of alcohol.
The deceased's son approached the insurance grievance redressal firm Insurance Samadhan, and managed to get claims amount of Rs 21 lakh after the post mortem found strangulation to be the cause of the death and no traces of alcohol.
Had the deceased been drunk, the insurance company wouldn't have cleared the claims as deaths due to the influence of alcohol or drugs are not covered under the insurance policy. There are many more such death cases which are covered generally, but have some exceptions. Take a look:
Death by murder
As the above case study shows, death by murder is indeed covered under the insurance. All you have to do is provide the death certificate along with the FIR and post mortem report. But, if the nominee is involved in murder, it will become a police case. Although the claim amount will still not lapse. "The claim amount will be paid to the legal heir as per succession law. In case, there is no legal heir then the claim amount will be kept with court till a successor is located," says Shailesh Kumar, Co-Founder at Insurance Samadhan.
Death by suicide
If the incident happens within a year of buying or reinstating the policy, the insurance company is not liable to clear the claim. Suicide will only be covered if the policy period has entered the second year. However, some insurers such as Future Generali do have a policy to pay the nominee 80 per cent of the premiums paid as death benefit, if the policyholder commits suicide within a year of the policy issue date. Note that an investigation may happen to ascertain if the nominee has instigated the policyholder to take such a drastic step. If she has, the claim will not be cleared.
Death due to participation in adventure sports
Next time you go bungee jumping, paragliding, car racing or other such adventure sports, you should know if something were to happen to you, your life insurance policy will not protect the finances of your family. Accidental deaths during adventure sports like skydiving, paragliding, bungee jumping, among others are not covered by insurance policy.
Death due to natural calamity
Death caused due to a natural disaster or act of God like an earthquake or floods, is typically not covered by insurance. But, if you have opted for any particular rider for the purpose or insurance regulator IRDA mandates that deaths due to this particular event will be covered, insurance companies will have to honor the claim. "If IRDA declares that claims are not payable during a pandemic or war-like situation only then companies can deny. Else companies are bound to pay all claims," says Kumar. For example, claims were settled for deaths due to floods in Kerala in 2018 and recently due to the cyclone in West Bengal. Deaths due to coronavirus are also covered.
Deaths due to pre-existing health conditions
Before you buy a life insurance policy, you need to disclose all material information such as pre-existing diseases and whether you smoke or drink or not. If the death occurs because of a pre-existing health condition, then the claim is not honoured by most companies. Besides, sexually transmitted diseases like HIV or AIDS are also not covered.
Deaths due to accidents
Although deaths due to all accidents are covered by insurance, there are some exceptions. Accidental death under the influence of intoxication or drugs or if the insured is involved in criminal activity is not entitled to any payouts. "All life insurance policies that offer death benefits do cover death due to an accident. You don't need to buy a rider for the purpose. But, if you do buy an accidental death rider, it enhances risk cover of base life insurance plans at a small additional cost," says Samit Upadhyay, Chief Financial Officer and Head Product, Tata AIA Life.
Deaths outside the country
Life insurance policies are universal. So, all policies will cover deaths outside the country if you submit valid proofs. The only exception, however, is if you are a frequent traveler to countries categorised as danger zones countries such as those in Africa and the Gulf and do not disclose this information while buying the policy, and unfortunately die there, then the insurance companies will not settle the death claim.
"If a death happens in these countries then the insured travel record is checked. In case, the client had a previous travel record then the claim will be repudiated on grounds of hiding the material fact. Please note that Proposal Form asks for travel record of last two years and if you do have a record of travel in danger zones then insurance is not allowed," Kumar of Insurance Samadhan points out.
Deaths due to pregnancy or childbirth
If the death occurs during childbirth or due to complications in pregnancy, then it is not covered by a life insurance policy.
Life insurance policy is meant to support your family financially if you are not around. So, just buying the policy doesn't suffice the purpose. You need to be well aware of all policy exclusions so that if an eventuality happens, your nominee doesn't face the death claim rejection. "It is important to note that exclusions may differ from product to product. Exclusion clauses are mentioned in the policy document, so do read the proposal form carefully," says Anil Kumar Singh, Chief Actuarial Officer, Aditya Birla Sun Life Insurance.
Also read: Life insurance sector sees 18.6% drop in first-year premium: CARE Ratings
Also read: Coronavirus insurance: IRDAI allows 29 insurers to market short-term Corona Kavach policy
