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BASL Registration Number: 1951 | Non-Individual RIA. Regn No. INA000017620 | Validity Perpetual

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How to safeguard your family against rejection of life insurance claim and understand settlement?

Updated: Mar 18

Adequate life insurance cover taken can ease the financial burden of a family to a great extent. However, the responsibility does not end in just taking a life cover. It is imperative that the bread earner and the family is aware of certain issues relevant to the claim settlement process in an unfortunate event. This has become more relevant in the present times amidst the pandemic situation.

Foremost being the situations under which an insurance company can reject a claim. It is imperative that the family of the deceased knows the type of deaths that are not covered in a life insurance contract. These are:

  1. Death due to natural calamities like earthquake or floods

  2. Death due to accident unless covered in a rider. However, if the policyholder was intoxicated or engaged in adventure sports activities at the time of the accident, the claim will be rejected.

  3. Death due to suicide. Policyholder committing suicide within a year of buying the policy will result in rejection of the claim. However, the nominees are entitled to receiving at least 80% of premiums paid in such cases.

  4. Death due to illness. Insurers can also reject claims if the insured did not disclose some critical health conditions or harmful habits like smoking.

  5. Death due to pregnancy complications.

Documents required in filing a death claim:

When a policyholder dies within the tenure of an ongoing policy, the nominee is entitled to get the pre-determined sum assured. To avail the same, the nominee has to formally file a death claim with the insurance company for seeking payment of life cover amount. The intimation to the insurer about the death of the insured should be done at the earliest. The insurer will then ask for a list of documents. These include:

  1. Original Death certificate from the municipal authority

  2. Original policy document

  3. Copy of claimant’s identity and address proof

  4. Copy of bank account proof (cancelled cheque)

  5. Filled up death claim form

If it is a non-accidental death, then additional documents required are:

  1. Hospital medical report of the deceased, if any. (cause of death, test reports)

  2. Hospital Certificate provided by the medical attendant

In case of accidental death, the additional documents required are:

  1. FIR in case of accidental death

  2. Copy of the driving license, if the insured was driving the vehicle at the time of accident.

Who can make a claim?

Nominee (s) or a guardian (in case the nominee is minor) can make a claim. In the absence of a nominee, the legal title to claim proceeds should be made by submission of proof of title/succession certificate (given by a competent Court).

Time taken for claim settlement:

As per IRDA regulations, settlement or repudiation of claim should happen within 30 days of receiving all documentary evidence, unless the case requires an investigation. In case of an investigation, the settlement process could take up to a maximum of 120 days.

Payout Options:

A family may not be financially equipped to handle the huge insurance claim wisely. Keeping this in mind, insurance companies in recent years have come out with customised term plans with different pay out options. These include

  1. Monthly income option where the death benefit is paid in equal monthly instalments over the chosen period.

  2. Increasing monthly income where the monthly pay outs increase every year at a pre-determined rate mentioned in the policy. The pay outs increase keeping in mind that living expenses increase with inflation

  3. Lumpsum + Monthly Income: This is a combination of the above 2 options. Here, the nominee would receive a specified portion of the sum assured as lumpsum and the balance is paid in equal or increasing monthly pay outs.

Usually, insurers don’t change the payout option chosen at the time of buying the policy. However, some allow the beneficiary to alter it – especially if it is from an income to a lumpsum payout option and needs to be specified in the claim.

It is imperative that the breadearner and the family are aware of these basic issues to ensure a hassle-free claim settlement.

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