What Kind of Deaths are Not Covered in a Term Insurance Plan?

Term insurance is a simple way to secure your family’s future — if you pass away during the policy term, your nominee receives a payout. But here’s what many people overlook: not every kind of death is covered. Some types of death are listed as ‘exclusions’ and buried in the fine print of the policy document.

That’s right. Even with term insurance, certain situations — like suicide in the first year or death during illegal activity — can lead to claim rejection.

So, knowing what kind of deaths are not covered in a term insurance plan is just as important as understanding what is covered. In this blog, we’ll break down the exclusions, common reasons claims are denied, and how to ensure your family actually receives the financial support you planned for.

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Overview

What Kind of Deaths are NOT Covered in a Term Insurance Plan?

Not all deaths guarantee a payout from your term insurance policy. Understanding these exclusions can help avoid nasty surprises later. Here are the types of death not covered in term insurance:

1. Suicide within the first policy year

This is one of the most common exclusions. Does term insurance cover suicidal death? Yes—but only after the first 12 months. If the policyholder dies by suicide within a year of policy issuance or policy revival after lapse, the insurer will reject the claim and refund about 80% of the 1st year’s premiums to the nominee.

Note: This snippet has been taken from a popular insurer’s flagship plan to illustrate the exclusions better.

2. Death due to participation in hazardous or extreme sports

If the policyholder dies while engaging in high-risk activities such as paragliding, rock climbing, or deep-sea diving, the claim may be denied, especially if these activities are frequently undertaken as part of a hobby or profession and are specifically excluded under the policy.

3. Death due to intoxication or substance abuse

Deaths resulting from drug overdose or substance abuse are typically excluded from term insurance coverage. If the policy clearly mentions that substance or alcohol abuse is excluded, any claim arising from such causes will be rejected. So, if you’re wondering what kind of deaths are not covered in a Term Insurance Plan concerning alcohol or narcotic substances, here’s your answer.  

4. Death while committing a criminal act

If the insured dies while involved in an illegal activity, like theft, assault, or evading the police, the insurer has the right to deny the claim.

5. Death due to pre-existing diseases/medical history not disclosed

This one’s tricky. If a policyholder deliberately hides a serious illness or lifestyle habits like smoking while buying the policy, it can be considered fraud, even if the claim arises after several years. While the moratorium period (3 years) protects honest disclosures by preventing claim rejections for unintentional omissions, it doesn’t cover deliberate non-disclosure of material facts, which may impact their underwriting decision and any attempt to mislead the insurer. Insurers can still deny claims after this period if there’s evidence of intentional concealment. This safeguard exists to ensure genuine claims aren’t rejected over minor errors, while keeping fraud in check. That’s why full and honest disclosure at the time of purchase is absolutely critical.

Example: Meet Sonal, a 38-year-old who had been treated for early-stage breast cancer five years before buying a term plan. Fearing a higher premium or outright rejection, she chose not to disclose this medical history on her application.

Seven years later, she tragically passes away due to a recurrence of cancer. When her family files a claim, the insurer investigates and uncovers her past treatment records. Despite the claim being well beyond the 3-year moratorium period, the insurer denies it, citing deliberate and material non-disclosure.

Since the omission was intentional, the moratorium doesn’t protect the claim. And if the insurer can provide clear proof of this deliberate concealment, they’re within their rights to reject the payout.

6. Death due to self-inflicted injuries

If death results from deliberate self-harm (but not classified as suicide), insurers may still reject the claim, especially for rider benefits like accidental death cover. These cases are handled carefully to assess intent and policy clauses.

7. Death due to war, civil unrest, or terrorism

Some term plans have specific exclusions for deaths occurring due to war, acts of terrorism, or civil commotion where the life assured was the perpetrator. While most policies include such coverage if the life assured is the victim, it’s best to check the fine print.

8. Homicide (if nominee is under investigation)

If the policyholder is murdered and the nominee is a suspect, insurers will temporarily hold the claim until the investigation clears the nominee of wrongdoing.

Example: Priya named her husband as the nominee in her term insurance policy. A few years later, she was tragically murdered. Since her husband was listed as a suspect in the police investigation, the insurer put the claim on hold. Only after he was legally cleared of any involvement in her death did the insurer proceed to release the sum assured. This ensures that the benefit doesn’t go to someone who may have had a role in the policyholder’s death.

These are some of the types of death not covered in term insurance, and knowing them helps in picking the right policy and avoiding future claim rejections. Always review the exclusions before you commit.

Ditto’s Take: Read the policy wording carefully to understand the coverage and exclusions. Make sure your family is aware of the policy details and has all the necessary documents. If a claim is unfairly rejected, you can escalate the matter to the Insurance Ombudsman or approach the consumer court for resolution.

What is Covered Under Term Insurance?

When you buy term insurance, you're protecting your loved ones from financial uncertainty in case something happens to you. Here’s a breakdown of the types of death covered in term insurance:

1. Natural Death
   This includes death due to ageing, cardiac arrest, or other natural causes. It’s the most straightforward scenario, and your nominee receives the full sum assured as mentioned in the policy. No riders are needed for this benefit.
2. Death due to Terminal or Critical Illness (with or without term insurance riders)
   Some illnesses, like cancer, kidney failure, or a heart condition, can lead to death. In such cases:

• Without riders: If death occurs due to illness, your nominee still gets the full sum assured under a standard term plan.
• With riders:
  • A Terminal Illness Benefit allows you to access part or all of your sum assured early if you’re diagnosed with a life-limiting disease (like stage IV cancer) and have less than 6 months to live.
  • A Critical Illness Rider pays a lump sum when you're diagnosed with specific life-threatening illnesses. There are two types:
    • Accelerated Rider: The payout is part of your base cover (e.g., if you’re covered for ₹1 Cr and get ₹20L for critical illness, your family gets ₹80L after death).
    • Standard Rider: The payout is over and above your base sum assured, meaning your nominee still gets the full ₹1 Cr separately.

3. Accidental Death
   Does term insurance cover accidental death? Yes—death caused by a car crash, workplace injury, or similar events is covered under the base plan.
   
   If you opt for an Accidental Death Benefit Rider, your nominee gets an extra payout—for example, if your base sum assured is ₹1 Cr, and the rider adds ₹50L, your nominee receives ₹1.5 Cr.
4. Death due to Natural Disasters
   Deaths resulting from events like earthquakes, floods, or cyclones are usually covered unless specifically excluded in your policy terms.
5. Pandemic-related Deaths
   Most modern term plans cover deaths due to pandemics like COVID-19.

Ditto’s Take: While it’s important to understand edge cases like fraud or non-disclosure, let’s not forget that death is a statistically rare event during the policy term, especially for younger, healthier individuals. And when claims do arise, the vast majority are paid out smoothly, particularly when the policyholder has made full and truthful disclosures.

Insurers aren’t in the business of denying genuine claims. In fact, they’re heavily regulated, closely monitored, and bound by strict claim settlement norms laid out by the IRDAI. On top of that, insurers are highly motivated to maintain a high Claim Settlement Ratio (CSR)—not just for compliance, but also because it’s one of the most powerful marketing tools they have. A high CSR builds trust and credibility, which directly influences customer choice.

So, if you’re honest at the time of purchase, rest assured—your family is extremely likely to receive the financial support you intended for them, exactly when they need it most.

Common Reasons for Term Insurance Claim Rejection

Even with a valid term insurance policy, a claim can still be rejected, and the reasons are often preventable. Here's a breakdown of the most common pitfalls:

1. Non-disclosure of material facts

This is the biggest red flag for insurers. Hiding health conditions, lifestyle habits (like smoking or alcohol use) can lead to outright rejection. Even if the claim is made years later, deliberate non-disclosure is treated as fraud.

2. Lapsed policies

If premiums aren’t paid and the grace period (usually 30 days) lapses, your policy becomes inactive. Yes, revival is possible, but it may involve medical underwriting, late fees, and stricter scrutiny. If death occurs during a lapse, there’s no payout.

3. Incorrect nominee details

Suppose nominee information is outdated or incorrect (for example, the nominee has passed away or the details do not match the ID proofs). In that case, the insurer will not know who to release the money to, which can delay or complicate the claim process.

4. Delayed claim filing

Insurers are empathetic, especially during a loss. But if the death isn’t reported within 6 months, expect the insurer to ask more questions. The longer the delay, the more rigorous the investigation, sometimes even leading to claim rejection due to a lack of timely information.

5. Misunderstanding policy exclusions

Sometimes, the policyholder—or their family—is unaware of specific exclusions (like deaths due to suicide in the first year, or illegal activity). These missed fine-print details can catch families off guard and result in rejection when they were expecting a payout.

Understanding these common pitfalls can go a long way in ensuring your loved ones don’t face a rude shock during claim settlement.

Importance of Reading the Policy Document Thoroughly

It’s crucial to thoroughly read the policy document, especially the exclusions section, before finalizing any term insurance plan. This section outlines the situations where your policy won’t provide coverage, including what kind of deaths are not covered in a term insurance plan. Being aware of these exclusions can help prevent any surprises during a claim. If anything in the policy is unclear or if you have doubts about specific terms, don’t hesitate to reach out to your insurance advisor or the insurer directly for clarification. Understanding the fine print ensures that you’re fully aware of the scope of your coverage and helps you make an informed decision, avoiding potential issues when you need the coverage the most.

How to Ensure a Smooth Claim Process

Understanding exclusions in a term insurance plan is essential to avoid surprises later. Knowing what kind of deaths are not covered in a term insurance plan ensures that your loved ones are properly protected.

• Full disclosure during policy purchase: Be transparent about your health, lifestyle habits, and pre-existing conditions to avoid claim rejection due to non-disclosure.
• Inform your nominee of the policy details: Ensure your nominee knows how to initiate a claim and what documents will be required, so they are prepared in case of your passing.
• Keep documents and medical history updated: Regularly review and update your medical records, personal information, and policy details with the insurer to avoid delays or complications during the claim process.

Being aware of exclusions, keeping your information updated, and ensuring full disclosure can help make the claim process smooth for your beneficiaries.

Best Term Insurance Plans 2025

1. HDFC LIFE Click 2 Protect Super: 
   HDFC Life Click 2 Protect Super is a comprehensive term insurance plan that offers strong customisation options and is backed by a reputable insurer. While it has an impressive claim settlement track record, it can be relatively expensive for some profiles.

• The plan has a high Claim Settlement Ratio of 99.2%, indicating that HDFC Life is highly reliable when it comes to paying claims.
• It maintains a low complaints ratio of just 2 per 10,000 claims, reflecting a good customer experience.
• It offers a range of add-ons, including accidental death benefit, waiver of premium on disability or critical illness, and total permanent disability cover.
• You can also opt for a step-up cover that increases your life cover in line with inflation. And with the life stage benefit, you can increase your cover at major life events like marriage & childbirth.
• One notable in-built feature is the zero-cost option, which allows you to exit the policy within a specified window and get your premiums refunded.
• The critical illness rider covers 60 illnesses and comes with a shorter-than-average 90-day waiting period. However, the critical illness payout comes with a 15-day survival clause and is paid in addition to the base cover, not as an accelerated benefit.
• The terminal illness benefit provides partial payouts on diagnosis.

Overall, this is a dependable and well-designed term plan that offers peace of mind, especially for those who want more flexibility. But if affordability is a key concern, it might not be the most budget-friendly pick.

2. ICICI Prudential iProtect Smart:
   ICICI Prudential iProtect Smart is a well-rounded term insurance plan that offers a good mix of affordability and benefits, making it especially attractive for salaried individuals and smokers.

• It comes with competitive premiums and a claim settlement ratio of 97.52%, alongside an amount settlement ratio of 92.1%, which reflects fair payout behavior on claims.
• One of its key features is the Life Stage Benefit, which allows you to increase your cover after life events like marriage or childbirth.
• It also offers a Zero Cost Option that lets you exit the policy within a defined period and receive your premiums back.
• The terminal illness benefit pays out the full sum insured upon diagnosis, providing financial support when it's needed most.
• You can add accidental death benefit coverage and critical illness cover for 34 listed conditions, with immediate payout on diagnosis. However, the critical illness benefit is paid from the base cover (accelerated payout).
• The waiver of premium applies only in case of permanent disability due to an accident, which limits flexibility in some health-related situations.

The plan does not offer inflation-linked top-ups or a separate payout for total permanent disability, but it still delivers strong value for those seeking straightforward protection with a few thoughtful add-ons.

3. Axis Max Life Insurance Smart Term Plan Plus:
   The Axis Max Life Smart Term Plan Plus is a flexible term insurance plan that offers seven different coverage options, catering to varied life needs.

• Among these, the “Regular (Level Cover)” and “Smart Cover” variants stand out, with the Smart Cover offering 1.5X coverage for the first 15 years—perfect for high-responsibility phases of life.
• The Regular option is straightforward and simple, ideal for those looking for a no-frills term plan.
• It comes with essential add-ons like accidental death benefit, waiver of premium on disability or critical illness, and a critical illness rider that covers 64 illnesses.
• The plan includes a zero-cost exit option, where you can get your premiums refunded if you exit during a pre-defined period.
• Women policyholders can benefit from added perks, such as Lifeline Plus, which adds extra value to the offering.
• However, the plan doesn’t allow you to increase your cover later or link it to inflation, which limits its adaptability over the long term.

Despite this, it remains a strong and customizable plan that works well for most people looking for flexibility and protection.

4. Bajaj Allianz Life eTouch II: 
   Bajaj Allianz Life eTouch II is a well-balanced term insurance plan that offers affordability, strong claims performance, and valuable rider options.

• It includes a Zero Cost Option that allows you to exit the policy during a specific period and get your premiums refunded, adding flexibility.
• The plan offers a waiver of premium benefit for permanent disability due to accidents, and a life-stage benefit that lets you increase your cover after life events like marriage or childbirth.
• Its critical illness rider covers up to 60 conditions, provides a payout in addition to the base sum insured.
• Women and non-smokers get highly competitive pricing, making it especially attractive for those profiles.
• The insurer has a strong claims track record with a 99.11% claim settlement ratio, a low complaint ratio of 4.4 per 10,000 claims, and a 93% amount settlement ratio—all above industry average.
• However, the plan doesn’t offer inflation-linked cover increases or a lump sum payout for total permanent disability, which might be a drawback for some.

Still, eTouch II remains a compelling choice for buyers looking for a reliable, feature-rich plan at a reasonable price point.

5. TATA AIA Sampoorna Raksha Promise: 
   TATA AIA Sampoorna Raksha Promise is a reliable and budget-friendly term insurance plan that offers good coverage, especially for individuals with lower annual incomes.

• It features strong claim performance, with a 98.9% claim settlement ratio, a low complaints ratio of 3 per 10,000 claims, and a 92.7% amount settlement ratio.
• The plan includes valuable add-ons like critical illness cover, which pays a lump sum over and above the base cover if you're diagnosed with any of the 40 listed illnesses.
• It also offers accidental death and total permanent disability benefits, along with a waiver of premium if you become critically ill or permanently disabled.
• Built-in features like the life stage benefit let you increase your cover after significant life events, and the terminal illness benefit includes a partial payout.
• However, it lacks a zero-cost exit option and doesn’t allow automatic cover increases linked to inflation, which may limit long-term flexibility for some.

Despite these limitations, the plan stands out for its affordability, solid features, and dependable claim support, making it a strong contender in the term insurance space.

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Conclusion

Understanding what kinds of deaths are not covered under a term insurance plan is crucial to avoid unexpected claim rejections. Common exclusions include suicide within the first policy year, deaths resulting from hazardous activities or substance abuse, deaths that occur while engaging in illegal acts, non-disclosure of pre-existing health conditions, and cases of homicide where the nominee is under investigation. To secure your family’s financial future, it’s important to choose your term plan wisely, carefully review the policy wording, and be fully transparent during the application process. Consulting with a trusted insurance advisor can also help you understand the fine print and avoid potential claim issues.

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