A life insurance plan can serve multiple purposes. It helps you save for various long-term goals such as buying a house, saving for your retirement, creating a fund for your child’s higher education, etc. Most importantly, it provides financial protection to your family in your absence. It ensures that they continue with the same lifestyle and don’t give up on their dreams and aspirations when you are not around anymore.
Now, at the time of a life insurance death claim, you won’t be present with your family. Hence, it is important to make them aware of the claims process and other nitty-gritty details such as the things that may impact their claim. So that when the time of a claim comes, your family receives the claim amount quickly and seamlessly.
In this article, we discuss the various things that can affect a life insurance death claim - as well as what you can do to ensure your family has a smooth claim settlement experience.
Things That Can Affect Your Life Insurance Death Claim
Making Incorrect Declarations
When you buy a life insurance policy, the insurance company will ask you to provide several details like your name, age, address, educational qualification, occupation, and so on. You will also have to provide details related to your medical history, your family’s medical history, any underlying medical conditions you may have, surgeries/treatments you may have undergone, etc. Further, you will need to submit several documents to support your application. The insurance company may also ask for documents such as an Aadhaar Card (proof of identity), income tax returns (proof of income), recent passport-sized photographs, etc.
While entering the details on the proposal form, you must make truthful and accurate declarations. It is also important to submit the correct documents. If you don't, your family's claim could be jeopardized.
Important: According to Section 45 of the Insurance Act, a death claim under a life insurance plan cannot be denied if the policy has been in force for three years continuously.
However, if a death occurs within the first three policy years, the insurers have been known to investigate the cause of death. They may also dispute and hence delay the claim if they discover any errors in the proposal form or discrepancies in the documents submitted. This means that your family may face difficulties during the claim process. To avoid this, ensure that you make honest declarations and submit the correct documents at the time of buying the life insurance policy.
Another factor that can affect your life insurance claim is the exclusions, i.e., the situations that the policy won’t cover. Death because of suicide in the first year of policy purchase is the only exclusion in life insurance. So, the insurance company won’t honour the claim if it is filed on the grounds of death due to suicide. The insurer, in this case, will return the premiums (without taxes) to your nominee.
Apart from death due to suicide in the first policy year, all types of deaths are covered by life insurance. Similarly, in Saral Jeevan Bima policies, there is a 45-day waiting period, before the cover starts. What’s more, if you have opted for riders (optional benefits) with your policy, there may be certain situations excluded under riders. For instance, death due to participation in adventurous activities is not excluded under a life insurance plan, but, it is excluded under the accidental death benefit rider.
It is very crucial to educate yourself and your family about all the situations that will and will not be covered under the life insurance plan as well as the riders you’re buying. This will ensure there are no hassles at the time of claim.
If you pass away while your life insurance policy is active, your nominee will have to notify the insurance company. Then, the insurance company will ask them to fill out a claim form and submit several documents. After your nominee submits the relevant documents, the insurer may request your nominee to submit additional documents - depending on the product and the cause of death. All the submitted documents will then be verified by the insurer. If everything is in order, they will process the claim. However, if the documents are not proper or in case of any discrepancy with them, they may reject the claim.
The claims process and documentation requirements may differ across insurance companies. Hence, while purchasing the life insurance policy, make sure you ask the insurer about the steps involved in the claims process. Also, ask them to provide a list of documents that will be needed during a claim.
Once you have the list, you can bring together all the documents and keep them in a safe, secure place. You can also open an e-insurance account or create an account on the Digilocker app and store the documents there. Make sure you share the account details with your family so that they have ready access to all the documents during a claim.
Not Paying The Premium
After you buy a life insurance plan, you will need to pay premiums under it regularly to keep it active. If you miss the premium payment due date, the insurance company will offer a grace period, during which you can make the missed premium payment. In case you fail to pay your premium within the grace period, your life insurance policy will lapse, i.e., end - and all benefits will stop. After this, if you pass away, your nominee will not be able to file any claim under the policy because it is no longer active.
So, it is important that you make timely premium payments under your life insurance policy. You can set up auto-debit or standing instructions on your bank account to ensure that your premiums are transferred to the insurer directly and on time. This will also reduce the possibility of your policy lapsing due to non-payment of premiums.
This brings us to the end of this article. We hope you are now aware of the factors that can affect your life insurance claim. Make sure you inform your family about all these factors. Also, take them through the steps involved in the claim process and any documentation they may need to submit. All this will ensure that your family is not hassled in case a death claim arises under your life insurance plan.