Life insurance claims: The only objective of buying a life insurance policy is to provide a financially independent life to your dependents in your absence. It is always better to go for a vanilla term insurance plan to protect your loved ones after you. But, a few mistakes in filling the application form can lead to rejection of your claim by the insurer.
The most important advice to ensure that the claims are settled without any trouble to your family is to fill out your application form on your own. Also, avoid the following mistakes for a smooth claim settlement process.
Life insurance claims: Five mistakes to avoid
1. Concealing or filling wrong information in the application form
Hiding or giving false information in the application form can lead to rejection of life insurance claims. Fill details such as age, income, occupation, qualification, lifestyle (smoking/drinking), information on previous policies and claims if any, and other information in the application form carefully and correctly. These are important factors in deciding the premium. Incorrect or incomplete data can also constitute fraud and lead to suspension of policy benefits.
2. Hiding pre-existing medical conditions
Disclosure of previous and existing medical conditions, operations, surgeries, etc., is mandatory because it influences the policy premium. When buying an online term plan, most insurance portals also require you to highlight lifestyle choices like smoking while computing the premiums.
Health details of family members, especially conditions like cancer, cardiovascular diseases, blood pressure, or any other hereditary conditions must also be shared to avoid rejections of life insurance claims.
3. Non-updation of the nominee
An insurance company can reject your claim in case of the absence of the nominee. This happens usually in the case when people buy life insurance at an early age and name their parents as nominees. Later, if there is a need to make a claim and the parents are not alive, the claim gets rejected.
Remember to update your nominee after your marriage or the death of your parents, whichever is earlier.
4. Not Disclosing Existing Insurance Policies
You must disclose all your existing life insurance policies while filling the application form. Sometimes people don’t fill these details only because they feel lazy to sift through the old policy documents. But concealing this information can get to rejection of your life insurance claim.
5. Non-payment of premium
If the due premium is not paid by the end of the grace period the policy lapses without value.
Insurers cannot reject claims after three years
Under Section 45 of the Insurance Act, no policy of life insurance shall be called in question on any ground by the insurer after three years from the date of commencement of the policy. In the case of revised policies, the three-year term will begin from the date of the revival of the policy.
Formalities for a death claim
When a person with a life insurance policy – called a life assured – dies, a claim intimation should be sent to the insurance company as early as possible. The assignee or nominee under the policy can do this. So can any close relative or the agent who handles the policy.
The claim intimation should contain information like the date, place and cause of death. The insurance agent has the duty to help the life assured’s family/ assignee to deal with the insurance company to fulfil the formalities for a claim.
The insurance company will respond to this intimation and will ask for the following documents:
- Filled-up claim form (provided by the insurance company)
- Certificate of death
- Policy document
- Deeds of assignments/ re-assignments if any
- Legal evidence of title, if the policy is not assigned or nominated
- Form of discharge executed and witnessed
Other documents such as medical attendant’s certificate, hospital certificate, employer’s certificate, police inquest report, post mortem report, etc could be called for, as applicable.
Formalities for a maturity claim
Where a life insurance policy is maturing, the insurance company will usually send intimation to the policyholder along with a discharge voucher at least two to three months in advance of the date of maturity giving details like the maturity amount payable.
The policyholder has to sign the discharge voucher – which is like a receipt – have his signature witnessed and send it back to the insurance company along with the original policy bond to enable it to make the payment.
If the policy has been assigned in favor of any other person or entity – like a housing loan company – the claim amount will be paid only to the assignee who will give the discharge.
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