Losing a loved one is emotionally overwhelming, and managing financial matters during such a time can add further stress. One of the key responsibilities for the nominee or family members is to initiate the claim process for the deceased’s term insurance policy.
Understanding how to navigate this process efficiently can help ensure timely access to the financial support intended to secure the family’s future. So, read on to learn about everything that’s involved in filing a death claim for a term insurance plan.
What is Term Insurance?
Term insurance is a type of life insurance policy that provides financial protection to the insured person’s family for a specific period, known as the policy term. If the policyholder passes away during this period, the insurer pays the nominee a fixed amount, called the death benefit.
Unlike traditional life insurance plans, term insurance does not offer a maturity benefit if the policyholder survives the term. It is designed to offer high coverage at relatively low premiums, making it affordable for you to financially secure your loved ones in your absence.
Step-by-Step Guide to Filing a Term Insurance Claim
Filing a term insurance claim is a crucial process that begins after the policyholder’s unfortunate demise. The nominee, designated for the death benefit, must follow a systematic approach to ensure a timely claim settlement. Here’s a step-by-step guide:
Step 1: Inform the Insurance Company
The first action the nominee must take is to notify the insurance company about the policyholder’s death. This can be done through various channels, such as visiting a branch office, calling customer support, or sending an email.
Key details such as the policyholder’s name, policy number, date of death, and cause of death need to be shared. The nominee’s relationship with the deceased, contact details, and identification must also be provided.
Most insurers expect this intimation to be done within 30 days of the death, though the exact timeline may vary by insurer.
Step 2: Fill Out and Submit the Claim Form
Next, the nominee must complete a death claim form provided by the insurer. This form requires information such as the deceased’s name, date of birth, policy details, and the cause of death. It can be completed online or offline and submitted with supporting documents. If no nominee was assigned, the claimant must legally establish eligibility for the benefit.
Step 3: Submit Supporting Documents
Along with the form, the claimant must submit certain documents that help the insurer verify the claim. These include:
● Original policy document
● Identity and address proof of the nominee
● Death certificate (original or certified copy)
● Cancelled cheque with bank account details
Additional documents may be required depending on the nature of the death:
● For Natural or Medical Deaths: Medical reports, hospital certificates, attending doctor’s statements, or employer/educational certificates.
● For Accidental or Unnatural Deaths: FIR, police investigation reports, post-mortem reports, and autopsy findings.
To avoid delays, these documents should be submitted within the stipulated time the insurer mentions.
Step 4: Claim Assessment by the Insurer
Once the required documents are received, the insurer begins the verification process. This involves reviewing all submitted materials to determine the validity of the claim.
If the policyholder died within three years of purchasing the policy, a more thorough investigation may be conducted. During this stage, the insurer may ask for additional information or clarification.
Step 5: Claim Settlement
After verification, the insurer either approves or rejects the claim. If approved, the death benefit is paid directly into the nominee’s bank account, either as a lump sum or in instalments, based on the policy terms.
According to IRDAI guidelines, insurers must settle valid death claims within 30 days of receiving all necessary documents. If an investigation is needed, it must be completed within 60-90 days, failing which the insurer may be liable to pay interest on the delayed amount.
Factors to Consider Before Claiming a Death Benefit
Before you begin claiming a term insurance death benefit, it’s essential to be well-prepared and understand several key aspects that can influence whether your claim is approved smoothly or delayed. Here are some important factors to keep in mind:
- Verify the Cause of Death Against Policy Inclusions
Ensure that the policyholder’s cause of death falls under the coverage of the term insurance plan. Deaths due to excluded causes, such as pre-existing conditions not disclosed at the time of policy purchase, substance abuse, may lead to claim rejection.
- Confirm the Policy Was Active at the Time of Death
A claim will only be processed if the policy was valid when the policyholder passed away. The insurance company can reject the claim if premiums were unpaid and the policy lapsed. Always double-check the policy status and payment history.
- Check the Accuracy of Information and Documentation
Ensure all the details in the claim form match the information in the original policy documents. Discrepancies in names, dates, or other personal details can raise red flags for insurers and may lead to delays or denial due to suspected fraud.
- Be Aware of the Claim Notification Timeline
Insurers generally require that the claim be reported within a stipulated timeframe—often within 30 days of the policyholder’s death. Failing to inform the insurer in time can complicate or invalidate the claim, unless you can provide a valid reason for the delay.
- Gather All Necessary Documents
Having all required documents ready, such as the death certificate, policy bond, ID and address proof of the nominee, and the completed claim form, can help streamline the process.
- Review the Policy’s Terms and Conditions
Thoroughly read the policy’s terms to understand what is covered and excluded. Also, check if the policy includes any nomination clauses. If no nominee was assigned, you may have to provide documentation proving your right to claim the benefit.
- Understand Taxation and Plan Your Finances
While death benefits from term insurance are usually tax-exempt under Section 10 (10D) of the Income Tax Act in India, it’s wise to consult a financial advisor. This can help in effective financial planning for the future, especially if a large lump sum is received.
What Are Some Important Conditions in the Term Insurance Claim Process?
Certain policy conditions must be satisfied before a term insurance claim is approved to ensure eligibility and avoid rejection. Understanding these requirements can help nominees navigate the claim process smoothly and confidently.
- The Policy Must Be Active at the Time of Death
The term insurance policy must be in force for any death benefit to be paid when the policyholder passes away. If premiums were not paid and the policy had lapsed, the insurer is not obligated to honour the claim.
- Review of Inclusions, Exclusions, and Risk Factors
Term insurance covers death due to both natural and accidental causes, but exclusions do apply. Common exclusions include:
- Death due to illegal activities or criminal acts
- Suicide within the first 12 months of the policy
- Misrepresentation or false information provided at the time of buying the policy
Insurers assess risk while issuing a policy. Those with high-risk lifestyles, such as smokers or heavy drinkers, may face different terms, premium amounts, and coverage conditions than low-risk individuals.
- Waiting Period Clause
Some term plans may include a waiting period. If the policyholder dies within this initial period, typically ranging from a few months to a year, the claim might not be approved or may only return a portion of the premiums paid.
- Suicide Clause and Partial Refunds
While a few insurers offer limited compensation or premium refunds for suicides occurring within the first year, many do not. In such cases, only a small percentage of the premium may be returned, if anything at all.
Claiming term insurance after a policyholder’s death is a sensitive yet crucial process that ensures the family receives the financial support promised by the insurer. By understanding the necessary steps, nominees can avoid unnecessary delays or rejections.
It is essential to read the policy document thoroughly, clarify doubts with the insurer, and stay informed about waiting periods, suicide clauses, and other specific terms. Proper preparation can smooth the process, offering some financial relief during a difficult time.