Term Insurance Claim Process

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Life can be unpredictable, even on the most predictable of days. You must be prepared for the worst, and, most importantly, you should prepare your loved ones for your absence. Financially supporting your family in your absence should be your primary goal. To fulfill this, the first step is to buy term insurance with the maximum number of benefits and the easiest way of claim settlement.

Term insurance is a form of a life insurance policy. It offers death benefits to the nominees of the policyholder in case of his or her untimely demise. If you decide to buy a term plan online, you need to learn about the term insurance claim process. You must be aware of the term insurance claim settlement ratio of the company you are buying insurance from. More importantly, you must help your nominees to understand it better, as they will need it only when you are not present. Any mistake made during the claim process might result in a denial. This will only add to the misfortune of your loved ones.

This article will help you know the important aspects of the claim process.

What is Term Insurance Claim Settlement?

Term insurance claim settlement refers to the process by which the insurance company pays out the sum assured or death benefit to the beneficiaries of a policyholder who has passed away during the policy term. Term insurance is a type of life insurance policy that offers coverage for a specific period.

When the policyholder dies within the term of the policy, the beneficiaries are entitled to receive the death benefit specified in the policy. The claim settlement process begins with the beneficiaries notifying the insurance company about the policyholder’s death and submitting the necessary documents as proof.

Right Method to Make a Term Insurance Claim

The nominees of the policyholder need to file for a claim immediately after the policyholder passes away. It will be difficult for your loved ones to handle your absence. However, there must be no delay, and the process must be completed accurately.

If you want to learn how to claim term insurance, you need to first know about the contents of the insurance plan. The nominees need to provide information regarding the cause, place, and date of death. However, the insurer will ask for more documentation to complete the claim process. The term insurance claim process typically involves the following steps:

Notification

The beneficiaries or the policyholder’s legal representative should inform the insurance company about the policyholder’s death as soon as possible. Contact the insurance company’s customer service or claims department and provide them with the necessary details.

Claim Form

The insurance company will offer a claim form that needs to be filled out. This form requires information such as the policyholder’s name, policy number, date and cause of death, and details of the beneficiaries.

Documentation

Gather the required documents to support the claim. The specific documents may vary depending on the insurance company, but common documents include death certificates, policy papers, ID and address proofs, and medical records.

Submitting the Claim

Submit the properly completed claim form along with the supporting documents to the insurance company. Ensure that all the details provided are accurate and complete.

Claim Verification

The insurance company will initiate an investigation to verify the claim. This may involve contacting medical professionals, reviewing medical records, and conducting interviews if necessary. The purpose is to ensure that the claim is valid and meets the policy terms and conditions.

Claim Decision

Once the investigation is done, the company will make a decision regarding the claim. If the claim is approved, the company will calculate the sum assured or death benefit amount and determine how it will be paid out.

Settlement

If the claim is agreed upon, the insurance company will arrange for the payment of the sum assured or death benefit to the beneficiaries mentioned in the policy. The settlement amount is typically paid in a lump sum, but other payout options may be available depending on the policy terms.

Documents Required to Claim Term Insurance

It is very important to be aware of the documents needed to file a claim. If documents are not updated or as per the requirement, it can lead to the rejection of the claim settlement. Here is the list of necessary documents that you could need:

• Claim form filled-up with the correct information
• Death certificate
• Policy documents
• Deeds of assignments or re-assignments
• The discharge form that is witnessed and executed
• A certificate from the last medical attendant
• Post-mortem report

If the death occurs within three years of buying the policy, the insurance company might ask for additional documents such as the hospital certificate, police report, and employer’s certificate.

Did You Know?

Businesses can also buy term insurance to protect their employees or key personnel. This can help to ensure that the business can continue to operate in the event of the death of a key employee.

Important Inclusions and Exclusions in Term Insurance Claim Process

Before starting the insurance claim process, the nominees need to be aware of the inclusions and exclusions. The term policy provides death benefits in case of both natural and unnatural deaths. However, certain clauses are applicable depending on the cause of death. For example, only some insurers pay the death benefit for suicide or return the premium, that too if it occurs within a year from the policy initiation date. Most insurance companies return only a percentage of the premium.

The insurance industry functions on risk assessment. This means that the death benefits depend on the policyholder’s risk category. Policyholders belonging to the high-risk category, such as smokers or alcohol consumers, get different benefits compared to people who do not have any such habit.

The rules are more or less similar for every insurance company. The simplest way to know about the specific inclusions and exclusions of your term plan is to check the policy document. You can also contact the insurer’s helpline to get the information. Once you have the data, you can act accordingly.

Special Plans for Terminal Illnesses

While making a claim, the nominees need to know if the term plan includes the particular cause of death associated with the policyholder. Certain terminal illnesses are not included in the general plans, and you need to opt for an exclusive cover to get death benefits for the same. For example, AIDS and cancer may not be included in your term policy.

Some policies even offer a certain percentage of the sum assured to the policyholder when they are still alive in case they are in the last stages of the illness. The remaining lump sum is paid to the nominees after the demise of the policyholder.

You must get in touch with your insurance company as soon as you are diagnosed to make a claim. The insurer will need to check the documents to verify the illness.

Formalities for Maturity Claim

There are special term policies that offer some maturity benefits. You need to follow certain formalities regarding the term insurance claim process. About three months before the maturity date of your policy, the insurance company sends you a notice and a discharge voucher. They also inform you about the lump sum that you will receive.

You need to sign the voucher and send it back to the insurer. You also need to include the policy documents. Once they receive and process the documents, the maturity benefit is transferred to the assigned nominee. Some insurance companies offer the Return of Premium (ROP) benefit. They return you the premium if you survive the policy tenure. Contact your insurance company to know if it is included in your policy.

Term Insurance Claim Rejection Reasons

There are several reasons why a term insurance claim may be rejected by an insurance company. Here are some common reasons for claim rejection:

Policy Incontestability Period

Most term insurance policies have an initial period, usually two years from the policy’s start date, called the incontestability period. During this period, the insurance company has the right to investigate and contest the policy based on any misrepresentations or fraud in the application. If it is discovered that the policyholder provided false information or concealed important details during the application process, the claim may be rejected.

Non-disclosure of Material Information

Suppose the policyholder fails to disclose important information related to their health, medical history, or lifestyle habits that would have affected the underwriting process. In that case, the insurance company may reject the claim. It is crucial to provide accurate and complete information while applying for the policy to avoid claim rejection based on non-disclosure.

Suicide Clause

Most term insurance policies have a suicide clause, which typically states that if the policyholder dies by suicide within a specific period, often one to two years from the policy’s start date, the claim will be rejected. After the suicide clause period expires, the policyholder’s death due to suicide is generally covered.

Policy Lapse

If the policyholder fails to pay the premiums within the grace period provided by the insurance company, the policy may lapse, and the coverage will cease. If the policyholder dies after the policy has lapsed due to non-payment, the claim may be rejected.

Exclusions and Limitations

Term insurance policies may have certain exclusions and limitations, such as death due to participating in hazardous activities or specific medical conditions. If the cause of death falls within these exclusions or limitations, the claim may be denied.

Incorrect Beneficiary Designation

If the policyholder did not update the beneficiary designation or failed to designate a beneficiary, the insurance company may face difficulties in determining the rightful beneficiaries. In such cases, the claim may be rejected until the beneficiary designation is clarified.

Fraudulent Activities

If there is evidence of fraud or intentional misrepresentation related to the policyholder’s death, such as faking the cause of death or submitting false documents, the claim may be rejected.

It’s important to carefully review the policy terms and conditions, provide accurate information during the application process, and promptly pay the premiums to ensure the policy remains in force. If a claim is rejected, the policyholder or beneficiaries can seek clarification from the insurance company and, if necessary, consult legal advice to understand the options available.

Tips to Make a Smarter Claim

If you opt for the term plan online, you will have the facility to manage your policy through the Internet and make the claim in a few minutes. You can do certain tasks to ensure that your claim is approved. The most important thing to do is to educate yourself and your family on how the claim process works.

Remember that it is most likely that you will not be present at the time of filing the insurance claim. Hence, you need to inform your nominees regarding all the important information about the policy. This includes the sum assured, claim process, terms and conditions, and any other aspect of the policy.

One thing that should be mentioned here is that if you have any add-on riders with your policy, you must tell your nominees about their benefits as well. You surely want your loved ones to take advantage of all benefits while making a term insurance claim.

Conclusion

Securing the financial future of your family through term insurance requires not only purchasing the policy but also being knowledgeable about the claim process. By promptly educating your nominees about the policy details, supporting them in filing the claim accurately, and providing the necessary documentation, you can increase the chances of a successful claim settlement.

Remember to be aware of the inclusions and exclusions, special provisions for terminal illnesses, and formalities for maturity claims. By adhering to these guidelines and seeking assistance when needed, you can make a smarter claim and ensure that your family receives the benefits they deserve during a challenging time.

Key Takeaways

• Term insurance is a policy that provides death benefits to the beneficiaries of the policyholder.
• Claim settlement refers to the process of paying out a claim to a policyholder after they have suffered a loss that is covered by their insurance policy.
• It involves notifying the insurance company, submitting the claim form, providing documentation, and waiting for the claim to be processed.
• The policyholder must provide proper documentation to support their claim. This documentation may include medical records, receipts, and police reports.
• The insurance company may reject a claim if the policyholder did not disclose important information, the policy lapsed, or the cause of death was excluded from coverage.
• If a claim is rejected, the policyholder or beneficiaries can seek clarification from the insurance company or consult legal advice.

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