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Will Term Insurance Cover Accidental Death?

dateKnowledge Centre Team dateFebruary 03, 2021 views115 Views
Will Term Insurance Cover Accidental Death?

In today's unpredictable, fast-paced life, no one knows what might happen at the next moment. This makes it imperative to think about your loved ones' future and Family Term Insurance's importance. For the safety of your family and securing their life, it is important to search for the best insurance plan which will cover any sudden deaths easily.

What does Term Insurance mean?

A Term Insurance Policy is a life insurance product that provides the policyholder with financial coverage for the term of the policy and financial security for their beneficiary in case of the policyholder's demise within the policy term. The monetary amount to be received by your beneficiary and the policy term will be according to the plan that you select.

A popular alternative to Term Insurance is Endowment Insurance which means that your insurance policy will also have a savings plan. The insurance company will invest a share of your insurance premium. The returns generated from this investment shall be paid back to you as well as the insurance benefits. However, Term Insurance plans are generally preferred as a Term Insurance provides pure life cover without any savings or investment component which means that a Term Insurance will provide a comparatively higher life cover at lower premium rates.

What are the Benefits of a Term Insurance Plan?

There are numerous ways in which Term Insurance plans prove to be beneficial. Some of these include:

Term Insurance Riders: When buying a Term Insurance Policy, you get the option to choose riders or additional clauses to go with it in exchange for a slightly increased premium. To better understand riders, think of how when ordering a pizza, there is the option of selecting additional toppings at different prices on the already existing recipe. Similarly, you can add a rider of your own accord to the already existing policy with its predetermined list of benefits.

For Example, You can add a Cover for Critical Illness Rider to your Term Life Insurance Plan so that in case you get diagnosed with a critical illness during the term of your plan, the insurance company offers you a certain amount of money to meet the treatment expenses and save your family from the financial setback.

Another example can be a rider for disability resulting from an accident so that in case an accident takes place which results in dismemberment or any other kind of disability; a certain amount will be paid to you by your insurance company to cover the costs of treatment and as well make up for the lost income.

Protection Against Mishappenings: Especially in a country like India where most families depend upon a single breadwinner, it is of the utmost importance to ensure the rest of the family's financial security in case something occurs. Even in households with more than one earning member, if one is no more, it will be necessary to supplement that person's income for the family to maintain its lifestyle. Buying a Term Insurance Plan will enable you to continue taking care of your family, even if you are no longer with them.

Tax Benefits: Under Section 80C of the Income Tax Act of 1961, you can avail of tax benefits of up to 1.5 lakhs on premiums paid in favour of your Term Insurance plan.

Multiple Payout options: If you feel that your beneficiary may not be able to manage a lump sum insurance payout or might fall prey to someone looking to scam them. You can choose from multiple payout options and select them to get the whole amount at once or in instalments paid to them at regular intervals.

What are the Types of Deaths Covered and Not Covered by a Typical Term Insurance Plan?

The payout and benefits of every Life Insurance Policy you buy from an Insurance Company depending on the cause of the policyholder's death, among other things. These conditions may sometimes vary according to the company in question or the chosen plan.

All these details are clearly stated in your policy paperwork, and this is why you should always read the papers stating all the terms and conditions carefully before buying a Life Insurance Plan and also share all these details with your nominee so that at the time of claiming the insurance payout, they are saved from any hassle and confusion.

The following list shall provide you with an overview of the types of deaths that a typical Term Life Insurance Plan does and does not cover:

  • 1. Covered - The following are the causes of death that are typically eligible for a Term Insurance payout:
  • Death Caused by Health Issues or Natural Deaths: If the policyholder dies a natural death, like dying in one's sleep, or a death caused by health-related issues except for sexually transmitted diseases within the policy term.
  • Death Due to a Natural Calamity: If the policyholder dies due to a natural disaster such as a tsunami or an earthquake within the policy term.
  • Accidental Death: Accident is defined as any unforeseen, involuntary, and sudden event, and if death occurs within 90 to 180 days of an accident by causes distinctly related to the accident, it is called an accidental death. Suppose the policyholder dies an accidental death during the policy term. In that case, accidental deaths are covered in most Term Insurance Plans, and if a plan doesn't cover them, it will have a rider available for the same. Here, accidental death can have several implications.

Some examples of such accidents are road accidents involving motor vehicles; slipping on a wet floor like in the bathroom; falling down the stairs; drowning in a river; getting an electric shock, falling accidentally from a great height; and fire-related accidents.

Deaths due to accidents that take place while the insured person takes part in adventure sports like skydiving etc., or has knowingly put themselves in a dangerous place or situation are exempted from Death by Accident by insurance companies, and no payout is given in such cases unless a specific rider has been applied covering the sport or activity.

2. Not Covered - The following are the causes of death that are typically not eligible for a Term Insurance payout:

  • Homicide by the Beneficiary: If the policyholder is murdered and proved that the beneficiary was the one responsible.
  • Death Due to Sexually Transmitted Diseases: If the policyholder's death is caused by a sexually transmitted disease such as HIV AIDS.
  • Death by Overconsumption of Intoxicating Substances: If the policyholder's death is caused by an overdose of an intoxicating substance like alcohol or drugs.

3. Conditional Cover: Some companies' plans offer an Insurance payout on Deaths by Suicide but only if the death occurs within 12 months of the Term Insurance Plan purchase. At the same time, others offer no payout at all for deaths by suicide and self-inflicted injuries.

What are the Important Points to Keep in Mind Before Buying a Term Insurance Plan?

  • Assess the financial needs of the people for whom you are buying the Insurance Plan. For example, if there are children, you need to consider the number of children and the major costs like expenses on education that they will face. Also, consider the total number of dependents and their needs, it is very important to think of the needs that may arrive in the future. For example, if there are elders or people well on their way to old age, consider their medical requirements.
  • Calculate the premium you will have to pay annually and decide according to your spending capacity. Factoring in the benefits you want, the payout amount you wish your beneficiary to receive, and the riders you want to attach along with the base plan offered by your insurance company.
  • Study the Claim Settlement Ratio (CSR) of the company before making your purchase. An insurer's CSR is calculated as the percentage of claims that they have settled during a financial year. While considering your options, you should always look at a company's CSR for at least the last five years because you want to ensure that your family doesn't face any difficulties in claiming their rightful payout.
  • Lastly, selecting riders is another important thing you need to think carefully about before buying a Term Insurance Plan. The Basic Plan is always generic, but the needs of the people vary. This is why these riders exist in the first place, to give you a more customized experience based on your needs and wishes.

Life is unpredictable and unreliable, but we, at Canara HSBC Oriental Bank of Commerce Life Insurance, strive to be the opposite. We understand your needs and offer Family Term Insurance and many other plans that act as tax saving investments for you so that you can ensure your family's future and ensure their happiness.

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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