Ch. 8: Money Back Policy Exclusions - Know Which Type of Death is Not Covered

Imagine you buy a smartphone online with a one-year warranty. For a while, the phone works perfectly. A few weeks later, however, you start having issues with the phone-battery. It starts to overheat if you use your phone continuously for 30 to 40 minutes. Because your phone is still under warranty, you contact the online seller and request a replacement. However, the seller informs you that the one-year warranty does not cover battery-related problems.

You tell the seller that he should have told you about this before you bought the phone. To this, he replies that you should have read the warranty manual, which states that the seller wouldn’t repair or replace the phone if there are any battery-related issues.

To avoid something like this from happening, it is very important to thoroughly read the manuals/ guides before buying any product. The same applies to Money-back plans. It is important to know under which situations the Money-back policy will pay, and the situations under which it won’t pay.

In this article, let’s take a look at the types of deaths covered and, most importantly, the deaths that are not covered under a Money-back plan.

So, let’s begin!

There is just one exclusion under a Money-back policy.

Death Due To Suicide In The First Year Of Buying The Policy
The only type of death not covered under a Money-back policy is death caused by suicide within the first year of purchasing the policy. Apart from that, a Money-back plan does not exclude any causes of death.

In case of death because of suicide in the first year of taking the Money-back policy, all premium payments (excluding taxes) made to the insurance company during the first year will be returned to your nominee.

For instance, Aksa has taken a Money-back plan worth Rs. 50 Lakhs for a duration of 30 years. She is supposed to pay an annual premium of Rs. 2 Lakhs for the next 20 years. She passes away by way of suicide a few months after buying the policy. In this case, the insurance company will deduct the taxes from the Rs. 2 Lakhs premium paid by Aksa, and then pay the remaining amount to her nominee - and the policy will terminate.

• Death Due To Natural Causes
  Natural death, i.e., death because of an illness, a serious disease, or a medical condition is covered under a Money-back policy.
• Death Due To Accidents
  Accidental death is covered under a Money-back policy too. By accidents, we don’t just mean road accidents. Death caused as a result of accidents at the workplace, home, etc. is covered too.
• Death Due To Natural Calamities
  A money-back policy covers death caused by a natural disaster or an act of God, such as a tsunami, earthquake, landslide, flood, or other natural calamities.
• Death Due To Man-made Disasters
  Death occurring due to man-made disasters like war, terrorism, invasion, an act of a foreign enemy, riots, strikes, civil commotion, military usurpation, etc. is covered under a Money-back plan.
• Death Due To Intoxication
  A Money-back plan covers death caused by excessive consumption of drugs, alcohol, narcotics, and other substances.
• Death Due To Participation In Hazardous Activities
  Death caused by participation in dangerous, adventurous activities such as parachuting, river rafting, paragliding, hiking, skydiving, scuba diving, and so on is covered under a Money-back policy.
• Death Due To Involvement In Illegal/ Unlawful Activities
  If the death happens as a result of engaging in any action that the law considers illegal or unlawful, it is covered under a Money-back policy.

Please note, this is not the complete list. There might be a lot of other deaths that a term insurance policy will cover besides the ones we’ve mentioned above.

Insurance companies allow you to customise your Money-back plan with riders. Riders are optional benefits that will offer an additional payout under specific circumstances. You can opt for riders such as the critical illness rider, waiver of premium rider, surgical care rider, accidental disability rider, etc. with your base Money-back policy.

Now, if you’re buying a Money-back plan with riders or add-ons, you should know that the deaths we’ve discussed above may not be covered by those riders. So, while the Money-back plan will cover death due to intoxication, accidents, participation in adventurous activities, etc., the riders you’ve opted for with the Money-back plan may not cover these deaths.

Say Vijay buys a Money-back policy worth Rs. 2 Crore and an accidental death benefit rider of Rs. 1 Crore along with it. Vijay enjoys partaking in extreme sports such as skydiving, paragliding, parachuting, hiking, bungee jumping, scuba diving, etc. and does so at least once a year. Last year Vijay went paragliding with some of his friends. Sadly, he passed away in a paragliding mishap.

Because deaths resulting from participation in hazardous activities are covered by Money-back plans but not by the accidental death benefit rider, the insurance company will only pay Vijay's nominee a claim of Rs. 2 Crore. They will not pay the accidental death rider benefit of Rs. 1 crore.

This is all about exclusions in Money-back policies. To understand all the deaths covered and excluded, make sure you read the policy wordings of both the Money-back plan you're buying and the riders you'll be selecting along with it.