Ch. 8: Exclusions & Inclusions of Endowment Plans

Imagine that you order your favourite cookies from an e-commerce website. However, the package arrives with damaged cookies. You contact the brand’s customer service to return the product, but they deny the request because their return policy explicitly states that, “Consumable items cannot be returned”.

You should always read the guidelines and conditions thoroughly before purchasing any product to prevent such an occurrence. Well, the same holds true for endowment plans too. Depending on the circumstances, the endowment plan may or may not provide coverage. And, it is important to know about the same before you purchase a plan!

In the previous article, we saw the different types of bonuses available under Endowment Plans. Now, let's examine the types of deaths that are covered and not covered under the plan in this article.

There is one exclusion that you should know about when it comes to endowment plans.

Death by Suicide

An insurer can deny the claim request only if the death is by suicide. Suicidal deaths occurring within the first year of the policy's duration are not covered. If the policy is active, then the insurance company will either pay the premiums paid up to this point or the surrender value of the policy, whichever is greater.

Note: Suicidal death is covered from the second year of a policy.

For example, Jay has taken an Endowment plan worth Rs. 30 Lakhs for a policy duration of 20 years. He chooses the limited pay option, for which he has to pay an annual premium of Rs. 1 Lakhs for the next 10 years. Six months after purchasing the policy, he commits suicide. The insurer shall pay the premium collected so far to the nominee after deducting appropriate taxes. In this case, after deducting relevant taxes from Jay's 1 lakh premium, the remaining amount shall be paid to his family.

Death Due To Natural Causes

Under the endowment plan, a natural death, that is, death due to an illness, serious disease, or health condition, is covered. Deaths due to HIV/AIDS and other sexually transmitted diseases are also covered. If you have any existing health condition, it must be disclosed to the insurer when purchasing an endowment plan to avoid any claim settlement hassles later.

Deaths Due to Involvement in Illegal Activities

Endowment plans provide coverage for death resulting from unlawful actions or crimes. However, any riders that you’ve added to the policy may not cover deaths that occur as a result of such activities.

Death Due To Accidents

Accidental deaths are covered regardless of where they occur - on the road, at home, or in public.

For example, Meera owns an Endowment plan with a cover amount of Rs 30 Lakhs. She was on her way to work when a speeding lorry crashed into her car. Unfortunately, Meera died on the spot. In this case, her family shall receive the sum assured of Rs 30 lakh as a death benefit.

Death Due To Natural Calamities

Deaths caused by natural disasters, such as a tsunami, earthquakes, landslides, floods, or other natural calamities, are covered by Endowment plans.

Death Due To Man-made Disasters

Deaths resulting from man-made catastrophes, such as war, terrorism, invasion, riots, protests, civil commotion, military intervention, etc., are covered under an Endowment plan.
Please note that Riders do not cover war-related deaths.

Death Due To Intoxication

Endowment Plans cover deaths caused by excessive consumption of drugs, alcohol, and narcotics. However, Riders may not cover alcohol or drug-related deaths.

For example, Sid buys an endowment plan of 20 lakhs and an accidental death benefit rider of Rs 10 lakhs. He was driving under the influence of alcohol when he crashed into a lamppost. Unfortunately, he died on the spot. Since the policy is still in effect, his family shall receive the death benefit from his Endowment plan. However, the add-on rider won't provide coverage as it does not cover deaths caused by intoxication. Thus, his family will get a claim amount of Rs 20 lakhs but not the 10 lakhs rider benefit.

Death Due To Participation In Hazardous Activities

An Endowment Plan covers deaths caused by engaging in risky, adventurous activities such as skydiving, kayaking, paragliding, mountaineering, skydiving, snorkelling etc. Please note that Riders do not cover deaths caused due to participating in such activities.

The endowment plan covers all types of deaths except suicide during the first policy year. However, the riders may not provide coverage in certain situations. Ensure you read the policy wordings and understand what your policy covers and what it doesn't. Choose the right one that suits your needs the best.