Common Life Insurance Exclusions in India

Insurance companies earn money by collecting the premiums from the policyholders, and pay death benefits to them, which on the other hand, are the expenses/losses to the insurance companies. Adding exclusions, help them reduce the likelihood of paying death benefits, thus reducing the expenses/losses.

All the life insurance companies have their own lists of exclusions and exemptions. Such a list of exclusions states the events and circumstances that cause deaths, which the particular policy does not cover. Therefore, it is vital to know in advance the events and circumstances of death that are not covered under your policy, so that your family can avoid any disputes after your demise.

The insurance company conducts an investigation when a nominee files a claim and submits the policyholder's death certificate. And, if the cause of the death is found to be an event or any circumstances mentioned in the list of exclusions, the claim will be rejected by the insurance company.

The list of exclusions differs from insurer to insurer. Still, the common exclusions are similar across all the insurance companies since they are governed by the Insurance Regulatory and Development Authority of India (IRDAI):

Suicide:

Suicide is usually considered as an exclusion in the life insurance policies. However, most insurance companies extend their coverage to suicide after one year of a policy commencement date. Therefore, if a policyholder commits suicide after one year of buying the policy, the insurance company will pay the entire sum assured to the nominee. But, if a policyholder commits suicide within a year of a policy commencement date, the insurance company may not pay the sum assured, but instead pay only 80% of the paid premiums to the nominee after deducting the taxes.

However, different insurance companies offer different payouts, which are mentioned in their policy documents. Also, the period after which the suicide is included in the coverage can be anywhere from 1 to 3 years or as per terms of the policy.

Life-threatening activities:

Participation in adventurous sports activities, like skydiving, bike or car racing, scuba diving, paragliding, etc., can be life-threatening. Such life-threatening activities are considered high-risk by life insurance companies. Therefore, all such high-risk activities are mentioned in the list of exemptions of the life insurance policy.

However, some insurance companies extend their coverage to death due to life-threatening activities, if you have provided the information that you frequently participate in such activities, at the time of buying the policy. Remember, this benefit is not offered by all the insurers and leads to an increased premium.

Criminal and illegal activities:

When a death of a policyholder is caused by participation in any criminal or illegal activities, the insurance company is not liable to settle the claim. It includes but not limited to involvement in any terrorist activities, participation in drug dealing, riding a bike without a helmet, not wearing a seatbelt, driving/riding under the influence of intoxicants like alcohol or drugs, etc. However, if a policyholder has a criminal record but dies a natural death covered under the policy, their nominee can get the sum assured.

In the case of driving/riding with alcohol consumption, some insurance companies may offer the insurance benefit to the nominee if the correct declaration of alcohol consumption is given while filing a claim.

Smoking habits:

Smoking is harmful for health. It increases smoking related risk to the health of the policyholder. Therefore, all the insurance companies ask you about your smoking habits at the time of purchasing the life insurance policy. As it involves a higher level of risk to one's health, insurance companies usually charge a higher premium to smokers.

However, to avoid paying the increased premium, many people do not disclose the details of their smoking habits. If a policyholder, who has not revealed the details of his/her smoking habits, dies due to smoking or related complications, the insurance company can reject the claim.

Therefore, it is necessary to provide the correct information when buying a life insurance policy.

Pre-existing health conditions:

Pre-existing health conditions are the diseases and illnesses that the policyholder has when buying a policy. Many insurance companies have exempted death caused by any pre-existing illnesses.

Some insurance companies extend their coverage to pre-existing diseases if the correct information is disclosed while buying the policy. However, they usually charge a substantially higher premium.

Pregnancy and Childbirth:

Most insurance companies do not cover death which occurs due to pregnancy related complications and during childbirth. Hence, the nominee does not get the sum assured in such cases.

Murder:

Almost all insurance companies provide cover against a murder. But, if the nominee is found to be a murderer, the insurance company does not settle the claim. However, if the nominee comes out clean and all the charges are lifted against him/her, he/she can receive the claim amount.

Natural Calamities and War:

Deaths caused by natural calamities, like earthquakes, floods, hurricanes, etc., and war or war-like circumstances, are on the insurance companies' exclusion list.

However, many insurance companies offer a rider that can cover a death caused by natural calamities. This rider is beneficial for those who live in an area that is more prone to natural disasters.

Travelling through a private aircraft:

The insurance company covers a death caused by an air crash if a policyholder travels through a commercial airplane. But, a death caused by an air crash while travelling on a private aircraft is a standard exemption put by almost all insurance companies.

To Conclude:

While these are the common exemptions of life insurance policies in India, you must thoroughly read the inclusions, exclusions and exemptions before buying a life insurance policy. The lists differ from insurer to insurer. Therefore, you should analyse the risks you may face and check if they are mentioned in the policy's list of inclusions or exclusions. Additionally, you should also consider buying suitable riders that can eliminate specific exclusions, which you might require.

Apart from the exclusions, there can still be some reasons why your claim can get rejected:

- Providing incorrect personal information, such as age, gender, smoking habit, pre-existing diseases, etc., when purchasing a life insurance policy leads to claim rejection.

- Misrepresenting the facts or providing incomplete and incorrect facts at the time of filing a claim may lead to life insurance claim rejection.

Therefore, the key to a successful claim settlement of a life insurance policy is to know and understand all the correct facts about your policy and provide all the correct facts at the time of purchasing a policy as well as filing a claim.

Warm Regards,
Ketki Jadhav
Content Writer

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