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Generally, there is no waiting period in a term insurance plan other than suicide. In case you have opted for additional riders such as covers for critical illnesses, there could be specific waiting periods for these.
Suicide is a ‘moral hazard’ in the insurance lingo. This means, that a person with good financial history, but a depressed state of mind can use life insurance as an exit strategy. For example, buying a large life cover and then killing self so that family can live debt-free, etc.
However, clinical psychology has suggested that a 12 month gestation period should be enough to allow a suicidal person to change their mind and bring them back to life. That means, if you buy a larger term insurance cover with a plan to commit suicide and let your family have enough money for survival, and wait for 12 months, you are unlikely to act on your plan.
The waiting period is a common clause used in all types of health insurance covers including critical health insurance. The waiting period clause defines the maximum time limit after which the insurer will start accepting claims under the policy. However, term insurance plans do not have a waiting period clause for covering untimely demise.
Only Saral Jeevan Bima, which is a standardized term insurance policy defined by the insurance regulatory authority in India IRDAI, carries a waiting period clause. Under this plan, a waiting period of 45 days is applicable for the full sum assured payment upon death. The waiting period applies to the first policy year from the risk commencement date.
If the insured dies within the waiting period Saral Jeevan Bima returns 100% of the paid premiums to the nominee. Only accidental death is covered within the waiting period. The taxes paid on premium amounts are not refundable.
As per IRDA, in the case of term insurance policies that were issued before 1st January 2014, the sum assured is not payable in cases of suicide. However, a specific percentage of the paid-up premiums may be returned to the nominee. IRDA has amended the suicide clause for policies issued post 1st January 2014 and allowed insurers to pay the sum assured, albeit, with specific guidelines.
If the insured commits suicide within 12 months of the policy starts date or revival, then the sum assured will not be paid to the nominee. However, suicide is covered post-12-months from the policy start date or revival date. Suicide is an outcome of a mindset that is situational.
The 12-month clause is made so that people do not take undue advantage of insurance policies that will cost them their lives. But such a mindset may not exist after 12-months. Experts suggest that the duration of 12 months is sufficient to bring the insured person out of the mindset of suicide.