Claim Settlement Process For Term Insurance- Understanding Its Nuances

Technical Document

Term insurance is the purest form of life insurance, which offers a lump sum payout to the nominees of policyholders in case of their demise within the policy period. At the same time, it should be noted that these insurance plans do not offer any maturity benefits. Therefore, if the insured person outlives the insurance tenure, no accompanying benefits will be obtained. 

You should purchase term insurance only after understanding its finer nuances carefully. You can always use a term insurance calculator to find the premiums payable for your desired life coverage. Additionally, you must choose an ideal policy tenure and check the insurer’s reputation. However, there is another aspect that you should know more about, namely the claim settlement process. This varies across insurers, and you should ideally compare the same, if possible, before buying your policy. That being said, some general steps may be followed in this regard. Here is a guide to the same. 

Claim Settlement Steps To Follow 

Claim settlement is the process through which the beneficiary or nominee of a policyholder files a claim with the insurer for getting the term insurance death benefit or sum assured upon the policyholder’s unfortunate demise within the policy period. 

Here are some of the steps to be followed for this purpose: 

  • The insurance company should first be informed either offline or online about the policyholder’s demise and the subsequent claim. All policyholder details, including the name, policy number, death cause, location of death, nominee details, and other information, should be included with this notification. The claimant may visit the insurance company or get the claim documents online from the insurance company’s website. 
  • A few documents will be required while submitting the claim, including the original term insurance policy document, the death certificate of the person insured, identity and address proofs of the policyholder and nominee, and so on. The form must be filled with care, avoiding mistakes, and submitted to the insurance company accordingly. 
  • In some cases, the insurance company will hold an inquiry into the cause of death, and other circumstances after the claim is submitted. This mostly happens when the policyholder dies within three years of the policy being issued. If the person insured died in any unusual way, then a copy of the post-mortem report and FIR may also be needed. 
  • The insurer is mandated, as per IRDAI (Insurance Regulatory and Development Authority of India) guidelines, to grant death settlements within 30 days of submitting all documents, facts, and claim forms by beneficiaries. If there is any further delay, the beneficiary may receive penal interest on the claim amount from the insurance company. 

The documents that you need will include the filled-up intimation form, death certificate, original policy documents, identity proof of the nominee, age proof of the policyholder, a medical certificate proving the cause of death, re-assignment/assignment details if they are applicable, and so on. Now that you know more about the claim settlement procedure, here is a look at the probable reasons why insurers reject claims. 

Why are claims rejected? 

While death claims are approved mainly by insurers, there are situations where they may also be rejected for diverse reasons. Some of them include the following: 

  • Provision of incorrect, misleading, or deceptive data by the claimant or nominee
  • If the premium has not been paid in time by the policyholder or if the policy has expired
  • Any instance of suicide before the completion of the first policy tenure, an accidental death under intoxication, or even under the influence of narcotics
  • Fake claims that are submitted by the claimants or nominees

These are some of the biggest reasons behind claim rejections. Customers should ensure that they provide proper information without concealing anything when buying their term insurance policies. They should also avoid errors that can prove costly later on. Nominee details should be clearly updated or changed if necessary without neglecting the same. Keeping the policy in order and paying premiums before the due date should be the responsibility of the policyholder to keep the policy active and avoid future hassles. 

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