The main purpose of a Life Insurance policy is to ensure financial protection to the family of the policyholder in case of his early death. We hear a lot about the rejection of claims in Life Insurance. As a policyholder, it is better to have an understanding on claims in Life Insurance, to ensure a smooth claim.
Claims in Life Insurance are of 2 types:
- Maturity Claim
- Death Claim
Maturity Claims in Life Insurance
This is the claim payable, when the policyholder is alive at the end of the policy term. This payment is made to the policyholder and normally will not create any complication. Insurance companies will inform the policyholders well in advance about the payment.
Policyholder has to return the discharge form duly signed along with the original policy bond to get the maturity claim of the policy.
Death Claims in Life Insurance
In case of death of the policyholder during the term of the policy, the nominee or a nearest relative has to inform the insurance company about the death. This is called death intimation. The intimation should contain the policy number, date of death, cause of death and the place of death.
On receipt of the death intimation, the Life Insurance company will issue a set of claim forms to the nominee. The requirements for death claim in Life Insurance depends on the duration of the policy.
- In case of death, within 2 years from the start of the policy (date of acceptance of risk by the insurance company), then such claims are treated as early claims.
- In case of death after 2 years, it will be treated as non early claim.
Non Early Death Claims in Life Insurance
In case of non early death claim, (death claims after 2 years from the start of the policy) the requirements are simple. The nominee has to submit the original policy bond and proof of death. Proof of death is the death certificate issued by the local bodies like municipality. Nominee also has to submit a claim form which contains the details of death, his relationship to the policyholder. In case of death due to unnatural causes, police inquest report, post mortem report etc. is also called for.
If all documents are in order, the Life Insurance company will decide on the claim very fast and settle the amount in favour of the nominee.
But if there is an ambiguity regarding death or if there is a reason to believe that the death is due to some illness which existed before taking the policy, then the Life Insurance company will go for a detailed investigation and the payment can be delayed.
As per section 45 of the Insurance Act, a Life Insurance company cannot reject a non early death claim quoting minor reasons. They can reject a non early claim, only if the insurance company can prove that the policyholder gave wrong information at the time of taking the policy and that too with the intention of cheating the company. This has to be proved by the insurance company at their cost.
Early Death Claims in Life Insurance
In the case of death claims reported within 2 years from the start of the policy or after revival, the insurance company will go for a detailed investigation to find out whether the claim is genuine.
Insurance company will call for the treatment particulars, last medical attendant’s certificate, hospital report, burial certificate, employee’s leave record etc. to eliminate any fraudulent intention. The company will ensure that the cause of death does not go back to a date prior to the issue of the policy. A responsible officer of the insurance company or an external agency will be deputed for the claim investigation.
On investigation, if it is proved that there was a suppression of material facts at the time of taking the policy, the insurance company will reject the claim. Life Insurance is a contract of utmost good faith. The policyholder and his agent are expected to disclose all material information pertaining to the health conditions at the time of buying the insurance.
Be honest while buying the Insurance policy
It is a common practice to allow the agent to fill the proposal form for insurance and the policyholder will just sign at the end. This can lead to many problems, if the agent is not doing it correctly.
You are expected to read each question and answer it correctly to the best of your knowledge. There are many questions regarding your health conditions/habits/family history etc. Your agent may not know all these. So, take some time and fill up the proposal forms as correctly as possible. If you miss out on any important information at this stage, it can create problems in the future.
Habits like smoking/drinking etc are very important, because your premium rates may vary depending on this. A smoker will be charged higher premium for the extra risk. Family history of diseases also has a bearing on your premium.
What to do, if a claim is rejected?
If a claim is rejected, the nominee can first approach the insurance company for a review with all the documents supporting his claim. All insurance companies are having their claim review committee which will look into it. You can also approach the Insurance Regulator with an appeal.
Still if you are not satisfied with their decision, you can approach the insurance ombudsman appointed by the government for this purpose. You can get the details of the ombudsman from the following link:
If you are not getting satisfactory response from the ombudsman, you still can approach the consumer forums.
Will private insurance companies settle the claims in Life Insurance?
All Life Insurance companies are regulated by the Insurance Regulatory and Development Authority (IRDA). The regulator will ensure that the interests of the policyholders are protected. Claims in Life Insurance will be viewed sympathetically by the companies and normally there are no problems with genuine claims. The problems are there for early claims, when there is a suppression of material facts, while taking the policy.