You may already be familiar with the nuances of a life insurance term plan. But while you may know a term plan’s meaning, a few aspects could still be unknown. For instance, do term insurance policies have any waiting period clauses? Is there anything like a waiting period in term insurance at all? Read on to get the answers to these questions.
Waiting Periods for Term Life Insurance
Purchasing a term insurance policy is a breeze nowadays, especially with multiple online options available for buyers. Yet, a waiting period may apply for critical or terminal illnesses after you buy the term insurance policy. It may vary between some days to one year or even more. In addition, almost all term life insurance policies offer coverage for the death of the policyholder from the day on which the policy comes into force. Yet, not all policies are immediately effective.
The waiting periods in these cases may hover between a few days to even two years. In rare situations, the waiting period may increase to four years. Here are some guidelines for these plans in case of demise within the waiting period.
- If there is any chronic ailment, the insurer will not pay the lump sum amount when the policyholder dies within the waiting period. Diagnosis of the terminal or chronic ailment within 90 days of the date of issuance or in the waiting period, the beneficiary or policyholder may raise claims for treatment purposes.
- The policyholder’s demise during the waiting period without any premium payments means that the insurance company does not have the liability to pay compensation.
- Suppose the policyholder passes away during the waiting period. In that case, the beneficiary may raise a claim for the premiums paid till the last applicable date or time of death from the date of the application.
There are waiting-period clauses that may also apply to suicide. Want to know how? Learn more about this below.
Waiting Period and Suicide
Suicide is one factor that you should understand carefully here. Waiting periods, as mentioned previously, may apply for term insurance policies with riders like critical or terminal illness coverage. Suicide, to the insurance industry, is a moral hazard. Hence, the risk of any depressed individual using insurance as an exit option always exists. For instance, consider a scenario where someone purchases sizable life insurance coverage and then commits suicide to provide for the family’s financial future.
Clinical psychologists always recommend a gestation period of 12 months for allowing those with suicidal tendencies to recover. It is one aspect that insurance companies note closely. The IRDA guidelines state that for policies issued before the 1st of January, 2014, the sum assured will not be paid for any suicide case. Yet, a particular percentage of the paid-up premiums may return to the nominee in such cases. IRDA has also changed the suicide clauses for policies issued after this date. It now allows insurance companies to pay out the sum assured amount, subject to some guidelines.
Here are the main pointers to note in this case:
- If the insured individual commits suicide within one year of the policy revival or starting date, then the nominee will not receive the sum assured amount
- Yet, suicide has coverage after twelve months from the starting date or the revival date of the policy
- It ensures that people cannot take advantage of term life insurance policies
Experts feel that overcoming situational mindsets is possible within a year. It is the principle behind the 12-month waiting period. The cooling or waiting period is the time frame between buying the policy and the timeline from when the policy starts offering benefits. While term insurance policies do not usually come with waiting periods, some plans have specific clauses worth noting. For example, they do not immediately provide coverage for critical or terminal illnesses. Carefully examine your policy document and check all these clauses before buying a term insurance plan. It is all the more important if you have a critical illness or any such rider attached to your policy.