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Know how to claim ULIP benefits after the policyholder’s death if you are the legal nominee. The life insurance claim is tax free under Section 10 (10D) of the ITA.
ULIP plans have emerged as a major investment scheme in the financial sector. With their one-of-a-kind features and structure, ULIPs have succeeded to attract a large number of people for long term financial investments. It is still very common for some people to be confused as to what is ULIP plan meaning. In this article, we will go over all you need to know about ULIPs and how you may claim death benefits as a nominee listed in ULIP in this article.
ULIP full form is Unit-Linked Insurance Plan. It is a life insurance product that also serves as an investment plan. A tiny portion of the investment is utilised to protect life through insurance, while the rest is invested in the stock market. Policyholders can pay their premiums monthly or annually depending on what they choose. ULIP plan returns on investments are subject to the risks associated with stock market investing. In the investment portfolio, the policyholder bears the investment risk, which is why their investment selection is based on their risk tolerance and needs. In the event of the policyholder’s death, the death benefit is payable to the lawfully chosen nominee. One of the most significant things to note is that there are ULIP tax benefits for you to avail. For instance, In the event of the policyholder’s death, the nominee will receive a death benefit as well as income gathered by ULIP funds, and as per Section 10(10D) of the Income Tax Act, this lump-sum guaranteed death benefit is tax-free.
If the policyholder passes away during the policy’s term, the nominee must formally notify the insurance provider about the same.
For the claim request to be formally registered, a claim form must be filled out and sent to the insurance provider along with the relevant documentation. The form asks for the insured’s information as well as the cause of death and basic info about the claimant.
The claimant must produce the original policy document, photocopies of the death certificate, the claimant’s picture ID and address proof, a police FIR and post mortem report in case of accidental death, and if the death was caused by sickness, a certificate and medical documentation from the doctor/hospital.
After all the necessary documents are submitted by the claimant, the insurer has 15 days to seek clarification and 30 days to settle a claim after receiving all papers as per the IRDA regulations. If an investigation is necessary, the required processes should be finished within 180 days.
It is important that the insurance company has the authority to reject claims based on the following two reasons:
- Distortion of facts.
- Failure to provide essential information that might influence the underwriter’s judgement on claim processing.
Now that you have a basic understanding of how to claim death benefits, ensure that you have all the information and relevant documents necessary to have a smooth claiming process.
In this policy, the investment risk in the investment portfolio is borne by the policyholder.