Life insurance has emerged as a versatile financial tool that helps individuals build a safety net for their future and ensure that their family members can lead a financially independent life even in their absence. Today, some of the most popular life insurance plans include money-back policies, endowment plans, and Unit Linked Insurance Plans, which help meet financial goals and enable building a safety net for the future. However, the success of such a plan depends on the features of the insurance, especially the life cover. Typically, insurance with a substantial life cover can provide the insured or the beneficiary of the policy with ample financial support to ease their financial obligations and future liabilities.
However, there are other factors too that influence the utility of a life cover. In this article let’s discuss the scope of life cover and how their features add to their utility.
What is Included in a Life Cover?
A life cover typically covers everything except the instance of suicide in the first year of getting the insurance policy. Under this life cover includes death caused by all kinds of natural causes. In addition, the policy extends financial benefit in the event of unforeseen demise of the insured due to accident, illness, injury, etc, during the active policy term.
Read along to find what is typically covered under life insurance –
Death caused due to natural disaster
Natural disasters such as earthquakes, tsunamis, floods, and hurricanes tend to bring along widespread death and destruction. Individuals who will be affected due to a natural disaster may be covered by life insurance. It is always encouraged to read the clauses related to natural disasters in the policy documents carefully to be sure of the coverage, in case of doubt.
Death due to accidents
Life insurance covers death caused due to accidents. Individuals who were involved in a fatal accident are entitled to death benefits, which will be received by their policy nominee or beneficiary.
Death due to involvement in dangerous activity
Activities like hiking, car racing, bungee jumping, paragliding, or bike racing can be extremely dangerous and often fatal. Individuals who frequently indulge in risky activities should consider getting a policy that covers these activities. They should also declare their indulgence while applying for a life cover to ensure the same is covered and ensure their claim gets approved by the insurer.
Death due to pre-existing medical conditions
In case the insured has some pre-existing health conditions, including diabetes, heart disorders, or other chronic illnesses they need to inform the insurer about them when purchasing the policy. Typically, insurance with a critical illness clause covers pre-existing conditions and provides the beneficiary with a death benefit if the insured passes away due to the conditions covered under the insurance.
Death caused due to alcohol or narcotics
If the insured passes away because of intoxication due to alcohol consumption or indulging in drugs, a life cover may account for such cases. However, individuals should declare these habits beforehand to ensure the policy accounts for them and will consider their claim. Notably, some life cover may include more instances and provide individuals with more diverse or comprehensive coverage. Based on one’s requirements individuals can pick an insurance policy and ensure that they have a comprehensive cover for their future needs and secure their family.
Exclusions of a Life Cover
A life cover will not account for every fatal instance. This is why it is important to carefully check the coverage and exclusions before signing a policy document. Typically, insurance companies exclude some standard instances from their policy cover. For instance, suicide or instances of self-harm in the first year of getting an insurance policy are excluded from life coverage. This means if the policyholder commits suicide in the first year of the plan, their family members will not receive the life cover applicable under the plan. However, they might get a refund of the premium they have paid until then. The same clause may vary among insurers, and it is wise to find out about the same in detail. Note that some insurers might not cover suicide after two years of the policy or ever.
While these instances are not covered by the policy, individuals’ habits, medical standing, and lifestyle activities could impact their claim processing.
Failure to declare existing health conditions, lifestyle habits, occupational hazards, etc. when purchasing any policy like a ULIP plan or endowment plan, emerges as a barrier to the claim process. Withholding information from the insurer could lead to non-consideration and non-payment of insurance claims during an emergency.
Do Riders on Life Insurance Offer the Same Coverage?
Riders are add-ons that are added to existing base plans to increase the scope of a life cover. Different kinds of riders cater to different instances and offer payouts based on the events they cover. For instance, a rider could offer payment in case of an accident, diagnosis of a covered critical illness, or temporary or permanent disability, ensuring additional protection.
However, not all riders might extend the same level of life cover as their base plan. A life cover may include cover for death caused due to involvement in any dangerous or adventurous activities. However, an accidental death benefit rider plan may not cover death due to involvement in adventure sports. Meanwhile, some riders may only help reduce the premium burden and not cover death, accident, or disability at all. This makes it crucial to compare the coverage of the base plan and rider to understand what is covered and what is not and then take necessary plans according to one’s needs and requirements.
A life cover should be comprehensive so that the policyholder can ensure widespread protection for their needs and also safeguard the future of their family members. A comprehensive life cover is essential in ensuring that the insured is financially independent during an accident or disability, whereas, in the event of their death their family is capable of taking care of their finances and meeting their future obligations without struggle or straining their resources.
