Insurance plans provide financial support in the event of death, illness, injury, loss of work, theft, and property damage. One of the most common types of insurance policies sold in the country is term life insurance—a type of life insurance that offers coverage for a specified period. With this plan, if the policyholder dies within the set period, the benefits are provided to the nominees. But this type of plan may not cover everything.

Term insurance coverage
Term life insurance is one of the most popular and straightforward insurance plans. It is less expensive than whole life insurance as it only lasts for a fixed period, usually between 10 and 30 years. While the exact terms can vary for each policy, term insurance typically covers the following:

– Death due to natural causes

– Death due to accident or illness

Term insurance exclusions
While term insurance is known for offering decent financial coverage, its scope can be limited, covering only specific events or conditions listed in the policy document. The amount of coverage can also be limited at times. There are many things that a term insurance policy may not cover, and they are called exclusions. One should know about these exclusions while signing up for an insurance plan to avoid getting their claims rejected later. While some events or incidents can be added to the coverage for a fee, many cannot be covered under the policy at any cost. Here is what term insurance plans do not cover:

1. Misrepresentation or incomplete information
If the insurance company finds out that the policyholder has withheld information or furnished wrong information about themselves, they can deny the benefits to the beneficiaries. For instance, at the time of buying a policy, if one has not disclosed an existing illness, lifestyle habits, or other issues that could have contributed to the death later, then the insurance claim can be denied.

2. Death due to undertaking high-risk activities
If the policyholder dies while engaging in clearly high-risk activities, term insurance plans will not cover it. Such activities could include dangerous sports like:

– Scuba diving

– Skydiving

– Bungee jumping

– Rock climbing

– Drag racing

– Recreational and non-commercial piloting

– Mountaineering at high altitudes

– Professional sports with a high risk of injury

Another type of risky activity can be certain jobs, like that of a logger, construction worker, aircraft pilot, offshore oil rig worker, firefighter, and police officer. This type could also be excluded from a term life policy.

3. Death due to illegal activities
The insurance company can refuse to provide benefits to the nominees if it discovers that the policyholder died while engaging in illegal activities like theft, burglary, and arson, among others

4. Death after plan expiration
If the policy expires before the policyholder’s death, the provider will not offer the cash benefit. In life, the policyholder can renew the policy to avoid this from happening, but they may have to pay a higher premium amount for the new policy as the amount is recalculated based on the policyholder’s current age.

5. No beneficiary
Another thing that could lead to complications is the lack of beneficiaries. If the policyholder does not have designated beneficiaries, or if they do but the beneficiaries die before the policyholder does, the death benefit may go to the estate and not necessarily to another loved one.

Reading the policy document
The four major parts of an insurance contract are declaration, insurance agreement, exclusions, and conditions. It is important to review each section to know what is and is not covered.

– The declaration section 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.

– In a dedicated exclusions section, one will find an exhaustive and comprehensive list of things not covered under the policy. The exclusions differ from one policy to another, and if one is buying multiple policies, it is important to check the list of exclusions for each one.

– Under conditions section, the insurance company may provide multiple provisions for which the insurer must qualify to be eligible for claims. If the policyholder is unable to satisfy these conditions, the company has the right to reject their claim.

The terminology of an insurance policy can be complex, so it is important to seek clarification regarding unclear terms while buying the policy. One can always discuss the contract with their insurance agent or the provider’s customer service agent at length. If one ignores seeking clarification or reading the fine print, they could be at risk of facing rejection for filing a claim for an event, loss, or damage included in the exclusion list. By then, it is often too late to choose the loss or type of death as a policy add-on. In the case of term insurance, it is usually the nominees or beneficiaries who find out that they are not eligible for the benefits of a term life insurance plan, as the cause of death is not covered under the plan. So, while signing up for a policy, one should carefully review all the terms and then make a decision.