What is Decreasing Term Insurance Plan?

Death due to Suicide or self-inflicted injury

Suicide is the primary exclusion in any life insurance plan. The claim won’t be accepted and death benefit will not be paid if the policyholder Suicides within the first year of the commencement of the decreasing term insurance policy. If the policyholder commits Suicide within the first year, then the insurance company will reject the claim and will payout only the insurance premiums minus the administrative expenses. Some insurance companies may have a two year waiting period for the suicide exclusion clause.

Death due to the incident related to Adventure sports

Term insurance gives coverage only to death risks that are purely natural, accidental, or due to critical or terminal illness, which is not in the capacity of the policyholder.

Adventure sports like auto racing, sky diving, rock climbing, bungee jumping are risky.

In such cases, where the policyholder is aware that such adventurous sports may cause an injury or death and still is doing on their own will, is not covered. A typical life insurance policy does not include any incidence that happens due to adventure sports. However, there are insurance plans which especially cover adventure sports but charge a higher premium for its coverage. Some insurance companies may give you a plan but at a very high premium.

Private aircraft accident

Insurance companies do not cover private aircraft rides. Only commercial airlines rides are included. If a policyholder dies in and private aircraft accident, then the nominee will not get the insurance payout.

HIV or sexually transmitted diseases

HIV or sexually transmitted diseases are one of the exclusions of decreasing term insurance policy. If the policyholder dies due to AIDS or any HIV related diseases, then the death claim will be rejected by the life insurance company.

Fraud Claims

The death claims due to illnesses are verified by the insurance company to ensure that the illnesses were not pre-existing when the policy was purchased. This is done to avoid the fraud cases of the claim. If a medical test is done during the application process of the policy, then it confirms the health status of the policyholder.

At the time of the claim, it becomes easy for the insurance company to process the claim. Or if Suicide is proved as a murder and the beneficiary is shown to be involved in illicit acts, then there is no payout.

Use of drugs or excess medicine dosage

If the policyholder dies of consuming illegal drugs or excess intake of medicines or of medicines other than prescribed by Doctor, then the claim will get rejected.

Claim on lapse policy

One of the critical aspects of a life insurance policy is the premium payment. The policyholder is required to pay the insurance premiums on time to ensure continuity of the policy. If the policyholder fails to pay the term insurance premium on the due date, then he/she gets one month of the grace period. Claims made during the grace period also get paid out by the life insurance company.

However, if the premium is not made even at the end of the grace period, then the policy lapses. And there won’t be any payout for claims made post expiry of the policy.