Life insurance today is basically a promise to extend financial security to the insured’s loved ones. Having life insurance is like building a financial safety net that will help the beneficiaries tide over financial uncertainties and obligations even in the absence of the insured.
Today, the market is filled with different kinds of insurance plans, such as money-back plans, unit-linked plans, critical illness cover, and endowment policies. Each of such plans has distinct features and limitations. However, individuals can easily identify which policy suits them the best by simply comparing the life cover and the accompanying features. Life cover is the financial support that the insurer provides to the insured’s beneficiary to help them account for financial obligations and liabilities. A higher life cover helps account for financial obligations for an extended period and with ease.
That said, let’s discuss life cover in detail below and find out its utility.
What’s in a life cover?
Life insurance is a financial safety net that assists the insured or their family members to account for emergencies with ease and without relying on others’ help. A life cover tends to cover issues, such as natural disasters, accidents, injuries, and critical illness. However, most life covers do not include self-harm in the plan, especially in the first year. Typically, if the insured suddenly passes away or meets with an accident, the insurer offers the sum insured or assured to help the family tide over the financial obligations with more ease.
Here are the situations that are covered by a life cover –
Natural disasters: Floods, hurricanes, cyclones, earthquakes, etc., are known to cause havoc on the lives of the commoners. In this regard, having a life cover that accounts for natural disasters seems to offer peace of mind and hope to the insured. However, readily clauses related to natural disasters are important before buying a policy to understand what’s covered under it. Individuals can always discuss with their insurance provider to understand the extent of life coverage against natural disasters.
Accident: In case the insured gets involved in a tragic accident, the beneficiary of the policy be it a parent, spouse, or child will be entitled to receive the death benefit from the insurer. This life cover will help them to account for daily expenses, and outstanding obligations, and maintain their financial standing during challenging times.
Dangerous sports or adventure: Life insurance providers might not share one’s enthusiasm, when it comes to adventure sports or thrilling activities. Hence, those who regularly engage in adventure sports and risky hobbies such as hiking, extreme sports, paragliding, and car racing should disclose their habits when getting a life cover. Failing to be transparent could jeopardize the claim process and leave the beneficiaries vulnerable during an emergency or accident.
Pre-existing conditions: Pre-existing conditions such as diabetes, heart disorder, or chronic conditions often become a roadblock to availing of comprehensive life insurance. However, it is recommended to be transparent about the conditions and limitations beforehand to get suitable coverage and reduce the risk of claim rejection. Insurance with critical illness clauses typically covers pre-existing illnesses. This means the beneficiary of the policy would be eligible to receive a death benefit if the insured passes away during the term due to a covered illness.
Drugs and alcohol: While life insurance is effective in ensuring peace of mind to the insured and their family members, it’s important to be open about one’s lifestyle choices with the insurance provider. For instance, if drugs, alcohol, or cigarettes are part of one’s daily life, it is important to disclose the details to the insurer during the application process. Notably, some comprehensive policies do cover death caused by intoxication, but the key specifics of the plans may vary. This is why it is recommended to look for a policy with clauses that cover these habits and offer comprehensive coverage that meets the needs and requirements of the intending policy buyer.
Exclusions of life cover
Life insurance could emerge as a powerful financial safety net for the insured’s loved ones during an emergency. However, they may not cover everything under the moon, making it crucial for individuals to check the list of exclusions and limitations before signing the dotted line of the insurance. A thorough analysis of the policy document will help individuals understand which incidents and clauses are covered under the life cover, the set of rules to avail them and how similar they are to rules for other financial tools and schemes, like the NPS withdrawal norms.
Typically, most insurance companies do not cover suicide or self-harm attempts in the first year of the insurance policy. This means the insured’s family will not receive the death benefit or the accident benefit in the first year of the plan. However, some insurers might refund the premium amount that was paid by the insured. Notably, some insurers may not cover suicides or self-harm attempts at all during the entire policy term. Hence, it is safe to assume that the exclusions tend to vary among policy providers and one must check and confirm them before signing the policy document. Additionally, some insurers may cause hassles when setting claim requests, if the insured fails to mention details of their preexisting health issues, smoking, drugs, drinking habits, and risky lifestyle at the time of signing the policy document. To be on the safe side, individuals should be transparent and honest with the insurer and disclose all key details about their health, habits, and finances to ensure their loved ones can access the life cover during an emergency.
Life cover is undoubtedly a crucial component of financial planning. Individuals should check their full extent, scope, and limitations beforehand to ensure the overall financial safety and security of their loved ones during an unavoidable situation. However, to ensure this they should be honest with the insurer and disclose all essential details to the insurance provider at the time of purchasing the policy. This will enhance the chance of settling a claim during an emergency and help the beneficiary of the policy to access required financial aid when they need it the most.
