Our loved ones’ well-being is always a top concern, and we do everything we can to guarantee that our family has the best of everything. Buying a life insurance policy is one of the best ways of ensuring that our loved ones are secured even when we are no longer around with them physically. What if we told you that you could acquire a one-of-a-kind financial instrument that allows you to get life insurance and good investment returns in it? If you nodded yes, you are thinking about buying ULIPs.
ULIPs combine life insurance and investing into one package. This financial instrument uses a portion of the ULIP premium paid to provide life insurance coverage, while the remainder is used to build an investing corpus. The ULIP plans returns depend on the investment tools and market performance. ULIPs have a mandatory five-year lock-in duration. They provide payouts in the event of maturity or the insured’s unfortunate death. Although a reasonable concern is how is the death claim payable in this hybrid financial investment tool calculated?
Understand All About Death Claim in ULIP
In ULIPs, the death benefit is the payment made to the nominee if you, the insured pass away during the policy period. The family gets the sum assured or the fund value, whichever is larger if the policyholder dies during the insurance period. Also, if the fund underperforms and its value falls short of the amount guaranteed, the sum guaranteed is owed.
Mortality Charges in ULIP
When you purchase ULIP, the insurer charges a mortality fee to provide insurance protection and other expenditures in the event of the policyholder’s death. It is generally taken, along with other fees, before the policyholder’s money is invested. The mortality fee is calculated using the amount at risk which is equal to the sum assured minus the fund value. The sum at risk is the amount that the insurer must pay out of pocket if the insured dies, and the fee should ideally decrease as the fund value increases throughout the policy period.
Process to Apply for Death Claim
Step 1: Notification
In the case that the policyholder passes away during the policy’s term, the nominee must formally notify the insurance provider about the same.
Step 2: Claim Form Submission
For the claim request to be formally registered, a claim form must be filled out and sent to the insurance provider together with the relevant documentation and information like the cause of death and information of the claimant.
Step 3: Document Submission
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 an accidental death, or a certificate and medical documentation from the doctor/hospital if death is due to sickness.
Step 4: Claim Settlement
After all the necessary documents are submitted by the claimant, then according to IRDAI regulations, the insurer has 15 days to seek clarification and 30 days to settle a claim after receiving all papers. If an investigation is necessary, the processes shall be finished within 180 days.
To summarise, digitisation has made the process of getting your hands on ULIPs much easier. To choose the best ULIP, look at online ULIP plans in India and check out fund performance comparisons to find the one that meets your needs!
