In spite of its inevitability, death isn’t something that anyone wants to plan for.
It is a topic that continues to be a taboo subject in most households. Even those who do plan for it and take the responsible step of buying term insurance often don’t pass on the full details to their nominees. Therefore, it is no surprise that term insurance nominees often don’t know how to go about filing a claim in case the need arises.
However, it is well-established that the moment when one needs term insurance will most likely come unannounced, so it’s better to be equipped with knowledge, regardless of whether you need it or not.
Also Read: Buying a life insurance policy? Don’t go by the claim settlement ratio alone
The importance of understanding the claim filing process cannot be overstated since the policy is specifically designed to take care of one’s financial obligations in such unfortunate situations. It helps to know the documents, procedure, and also the reasons for rejection beforehand.
The beneficiary/nominee should also be well-versed with formalities and also the stipulated time frame, which differs from one insurer to another. However, insurance companies usually follow a seamless and hassle-free approach to claims in such cases so that the tedious process doesn’t add to the nominee’s woes.
Also Read: Why putting down nominations is important… and why it still doesn’t work
Here’s a lowdown to help nominees understand how they should proceed with the claim filing process.
Informing the insurer
Time is crucial here as the insurer needs to be intimated about the policyholder’s demise as soon as possible. But before that, it should also be ensured that the policy is in force and all the past premiums have been duly paid up.
The beneficiary also needs to download the claim form online or obtain it from the nearest branch and fill out the details. This form needs to be submitted along with the relevant documents for the claim process to start.
Form submission with required documents
Next, you need to submit the form along with the documents needed to proceed with your claim. Typically, these are the documents associated with the policyholder that the insurance companies seek:
- Proof of age
- Death certificate
- Original copy of the policy documents (in certain cases of mass tragedy or accident, one can also request the insurance company to send a duplicate copy of the policy)
- Any medical documents (if needed) related to the policyholder’s demise
- Identity proof of the nominee or the beneficiary
Claim assessment
Next comes the process of claim assessment or examining the claim details before settlement. The insurance company will do its due diligence and look into the circumstances of the policyholder’s death and rule out any exclusions.
They might also need additional medical or legal documents during this process (varies on a case-to-case basis) to conclude their claim inspection. This usually happens if the policyholder dies by suicide or murder.
Claim settlement (within 30 days as mandated by IRDAI)
To make the process less time-consuming, the Insurance Regulatory and Development Authority of India (IRDAI) has mandated all insurance companies to follow the rule of claim settlement within the stipulated duration of 30 days.
This time frame counts from when all the documents have been submitted to the insurer and the assessment is also done from the insurer’s end. If the claim is not settled within the mandated time period, the insurance company will be liable to pay a penal interest.
Common grounds for claim rejection
Though the protection net of term insurance adequately covers you and your family, there are a few common grounds for claim rejection that the policyholder should be aware of at the time of purchase and nominees should be mindful of while filing the claim.
At the time of policy purchase, there should be absolute clarity in providing the required information and filling out the forms. Withholding information or not disclosing full details is the most common reason for claim rejection.
Here’s what to bear in mind
- Concealing pre-existing term policies: Make sure you disclose complete information about your existing term policies, if any. It significantly impacts your claim process.
- Not being transparent about health conditions: Any kind of pre-existing condition has a direct impact on your premium and coverage. If not disclosed at the time of purchase, this can be the reason for claim rejection.
- Not mentioning lifestyle choice: Lifestyle choices such as smoking have health implications that the insurer must be made aware of. Additionally, if you often indulge in extreme adventurous sports or activities that could endanger your life, it must be duly informed to the insurer who needs to take a call basis this.
- Death by suicide in less than 12 months of policy issuance: Term insurance covers death by suicide provided it occurs after 12 months from when the policy has been issued or revived. In case the time frame is less than 12 months, the nominee might not receive the complete death benefit.
- Lapsed policy: If the policy lapses due to non-payment of premiums and the policyholder passes away, the nominee shall not be entitled to death benefit. So, it’s important to keep the premium payment up to date and not let the policy lapse.
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