Can insurers reject a life insurance claim after 3 years?

Section 45 of the Insurance Act states that an insurer may question a life insurance policy only within 3 years of the policy's inception

• Section 45 protects life insurance claims after 3 years.
• Insurers can't reject claims for non-disclosure after 3 years.
• Only proven fraud allows rejection after the 3-year period.

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Many policyholders are unaware that Indian law provides strong protection for life insurance claims after a certain period. Under Section 45 of the Insurance Act, 1938, an insurance company cannot reject a life insurance claim for non-disclosure or misstatement after three years.

Swapnil Aggarwal, Director, VSRK Capital, said, "An insurance company cannot reject a life insurance claim arbitrarily, especially after a certain period, due to safeguards provided under the law. The “3-year rule” under Section 45 of the Insurance Act, 1938 ensures protection for policyholders and their families."

"Earlier, insurers often rejected claims, citing non-disclosure or misrepresentation. However, to ensure fairness, the Supreme Court of India has reinforced that genuine claims should not be denied on technical grounds," Aggarwal said.

Under this rule, once a policy has been in force for 3 years, the insurer cannot question or reject a claim based on misstatement or non-disclosure.

"The three-year period is calculated from the date of issuance, commencement of risk, or revival of the policy. After this period, the burden of proof lies on the insurer to establish fraud, ensuring stronger protection and timely claim settlement for beneficiaries," Aggarwal added.

Section 45 of the Insurance Act

Section 45 of the Insurance Act states that an insurer may question a life insurance policy only within 3 years of the policy's inception, the risk's inception, the policy's revival, or the addition of a rider, whichever is later. If the insurer believes there was fraud, it must inform the insured person or their family in writing and explain the reasons with evidence.

Fraud means deliberately providing false information, hiding important facts, or doing anything intended to mislead the insurer so the policy is issued. However, simply remaining silent about a fact is not considered fraud unless the person had a clear duty to disclose that information.

What happens during the first three years?

During the first three years, insurers have the legal right to investigate the policy and may reject a claim if they find evidence of material non-disclosure or incorrect information provided at the time of purchase. Once the three-year window has passed, the policy gains strong legal protection and cannot be challenged for non-disclosure, misstatement, or a false declaration.

The only exception is in cases of proven fraud, in which the insurance company bears the responsibility to prove the fraud. This provision was introduced to ensure greater certainty and fairness for policyholders and their families when making a claim.

Industry reassurance

Concerns around claim settlement have become a thing of the past in the life insurance sector. “Claim Settlement Ratio has seen a significant shift in more than a decade, improving from 85 percent levels in 2014 to 99 percent+ now," said Anup Seth, Chief Distribution Officer, Edelweiss Life Insurance. “This reflects a strong intent across the industry to ensure genuine claims are honoured and families receive support when they most require.”

This transformation has been driven by 2 key factors:

While section 45 of the Insurance Act plays its role, regulatory changes over the past several years have included improved customer disclosure to promote transparency and a guiding framework that ensures insurers settle genuine claims.

“Process governance within life insurance companies has become far more robust, with stronger systems and frameworks to ensure effective risk assessment and fraud detection,” said Seth.

The past decade has been instrumental in shaping the industry, creating the right balance between enabling sectoral growth while ensuring that policyholders interests remain firmly protected.

Policyholder rights matter

While there are still many cases where insurance companies begin investigations into high-value term insurance policies even after the policy has been running for many years. In such situations, families are often asked for additional documents or explanations, even though the policyholder has already crossed the three-year period after which claims cannot normally be rejected for non-disclosure.

Experts say, “In many instances, insurers do not immediately agree to settle a claim. In such cases, the situation changes only when the policyholder’s family or the insurance agent strongly reminds the insurer about the legal protection available under the law (such as Section 45 of the Insurance Act) and keeps following up with complaints.”

When they continue to raise the issue and put consistent pressure on the insurer, the company may review its earlier decision and eventually process and settle the claim. In simple terms, persistence and awareness of legal rights can help families get the claim approved.

What many people do not know is that under Section 45 of the Insurance Act, a policyholder cannot be questioned after three years except in cases of proven fraud, as mentioned above. However, families are often unaware of this right when a claim arises, and this lack of awareness can lead to unnecessary delays.