What is a term insurance claim?
A term insurance claim is a request that the nominee of the policy makes to the insurance company upon the death of the life assured. The claim provides the life assured’s family with the death benefit at a time when it is most needed.
The term insurance claim process is simple so that the nominee does not feel an additional burden during an already difficult time. When the insurer is notified of the life assured’s death with the necessary documentation, the insurer checks the information and settles the claim within a certain timeframe. The sum assured can help the family handle future costs, responsibilities and commitments.
Step-by-Step Process of Term Insurance Claim Settlement
Since the main purpose of a term plan is to safeguard the family’s financial security, the term insurance claim process has been designed to be simple and efficient. For nominees, knowing how to claim term insurance in detail can help them receive timely financial support when it is most needed.
Step 1: Intimation of Claim
The first step is to inform the insurance company about the death of the life assured. Prompt intimation let the insurer initiate the process of settlement in no time.
Step 2: Submission of Documents
After filling out the claim form, the nominee must send in all of the mandatory documents. Insurers can ask for the original policy document, a copy of the death certificate, verification of the nominee's identity and address, and, if required, any additional documents.
Step 3: Investigation by the Insurer
If the claim is raised within three years of policy issuance, the insurance company can conduct an investigation. For example, if the reason is critical illness, the life assured’s detailed medical history can be asked for. In cases of accidental death, suicide, or murder, the nominee may have to provide additional documentation that can include a police FIR and post-mortem report. This step verifies that the claim is genuine and valid under the policy terms.
Step 4: Claim Settlement Timeline
Life Insurers must settle death claims within 15 days from the date of intimation of claim . However, if further investigation is required, the insurer must finish it within 45 days from the date of intimation of claim . If the insurer fails to meet this deadline, they will be required to pay punitive interest.
Knowing each step of the term insurance claim process empowers nominees to handle the settlement without added stress.
Types of Term Insurance Claims
When it comes to a term insurance claim, beneficiaries can raise the following claims:
Death Claim
It is filed by the nominee after the death of the life assured during the policy term. The insurer examines the claim and once validated, pays the sum assured to the nominee.
Important points for death claims:
- Made by either the nominee or the legal heir.
- Requires documents like the policy papers, medical reports, and the death certificate.
- After documents are submitted, they are processed within the timelines the regulator has specified.
Maturity Claim
While standard term insurance plans do not offer a maturity benefit because they only cover the risk of death, certain plans with a ‘return of premium’ (ROP) option can allow the policyholder to claim a maturity benefit. In such cases, if the life assured survives the entire tenure, the insurer returns the total premiums paid.
Rider Benefit Claim
Term insurance policies may include optional rider benefits such as Accidental Death Benefit, Critical Illness, or Accidental Disability.
In case of death-related riders (e.g., Accidental Death Benefit), the nominee is eligible to claim the rider benefit along with the base sum assured, subject to policy terms. For living event-based riders (e.g., Critical Illness or Accidental Disability), the life assured can claim the benefit during the policy term. Upon successful verification of the claim, a lump sum amount is paid as per the rider conditions.
Documents required for term insurance claim submission
While submitting your term insurance claim, there are several documents you are mandated to submit alongside the claim documents -
List of mandatory documents:
- Original policy documents
- Attested copy of death certificate issued by local municipal authority
- Death claim intimation form
- NEFT mandate form attested by bank authorities or copy of cancelled cheque or bank account passbook
- Nominee's photo identity & address proof such as copy of Passport, Voter identity card, Aadhar (UID) card, etc.
- PAN Card/Form 60
Additional documents required:
- Copy of Medical Records (Admission Notes, Discharge/ Death Summary, Test Reports etc.)
- Attending Physician’s statement (Download Form)
- Employer certificate (where applicable) (Download Form)
- Accidental/Unnatural death
- First Information Report (FIR) or Panchnama/Police complaint
- Post Mortem Report
Final Police Investigation Report (if any)
Importance of Claim Settlement Ratio in Term Insurance
One important thing to consider when purchasing a term insurance plan is the insurer's claim settlement ratio (CSR).
CSR is the percentage of the total number of claims that have been settled to the total number of claims received by an insurance company in a given financial year. A high CSR indicates the insurer has a reliable record of fulfilling claims. For example, if an insurer has a CSR of 97%, it indicates that 97 out of 100 claims filed were successfully resolved.
It is also critical to consider the insurer's claim settlement procedure in addition to the CSR. Your loved ones will not face financial burden during tough times due to a straightforward and speedy settlement method, as well as a high CSR. As a result, before selecting a term insurance plan, always examine the claim settlement percentages of various insurers.
How Can You Avoid a Term Insurance Claim Rejection?
To reduce the chances of your claim getting rejected, keep the following in mind:
- Provide accurate details – Share correct information about age, income, lifestyle habits, and medical history at the time of buying the policy.
- Disclose pre-existing health conditions – Never hide illnesses or treatments. Non-disclosure is one of the main reasons for rejection of the claim.
- Pay premiums on time – Keep your policy active by paying premiums regularly.
- Nominee details – In the policy documents, be sure to include the nominee's name, relationship, and contact information accurately.
- Check exclusions – Go through the policy terms carefully to understand what events are not covered.
- Update details – Let the insurer know if there are any changes in job, lifestyle, or contact information.
Things to keep in mind before making a term insurance claim
- Inform the insurer as soon as possible regarding the policyholder’s demise. This will ensure speedy processing of claims and enable you to attend to all the other matters without worrying about the term policy.
- Before filing for term insurance claim, check that the situation under which the policyholder died is covered within the terms and conditions of the term policy. Claims towards term insurance in India are often rejected owing to a variety of reasons, and it is important that you check the policy terms and conditions before raising a claim. A term insurance claim can be rejected because the policy has expired without the policyholder’s knowledge, or if the policyholder has not disclosed their medical history or their habit and lifestyle, which may have played a part in them having to pay higher premiums or may even have resulted in their untimely death.
- Check that the information filled out in the term policy documents are accurate, as are the details that you enter while filling out your claim form. These have to be checked very carefully since if these do not match, you could be in trouble for fraud and your claim will most definitely be rejected.
- Before raising a term insurance claim, make sure that the cause for the policyholder’s death was not listed as an exclusion under this term policy. Exclusions could typically include a pre-existing medical condition that the insurer was unaware of, death due to being under the influence of alcohol or drugs, or even due to any hazardous activities they have indulged in.
Important Inclusions and Exclusions
Most term insurance plans in India have several listed inclusions and exclusions, which are intimated to the policyholder at the time of the policy being issued and depend on the policyholder’s risk profile.
However, exclusions could also include the cause of death being suicide. It is best to go through the fine print of your policy when it is issued to understand the inclusions and exclusions offered within the term policy.
FAQs
What needs to be done if the term insurance policy documents are not available with the Nominee?
The nominee can still file a claim even if they don't have the original insurance documentation. They can call the insurer's branch office or customer service immediately, explain the situation, and follow the procedures they are instructed to complete the term insurance claim process.
What happens when your life insurance claim gets rejected?
In these situations, the nominee would not get the death benefit. This can happen in case of situations where the policyholder fails to fully disclose information, doesn't pay premiums on time , or if the cause of death is one of the exclusions in the policy etc. If the rejection is unjust according to the nominee, they may request the insurer to reconsider, escalate the matter to the insurance ombudsman, or even take legal steps to contest the decision.
