Term Insurance Claim

A term insurance claim is filed by the policy beneficiary to the insurance company in order to avail of the death benefit in case of the policyholder’s unfortunate demise. A majority of insurance companies offer a seamless claim processing facility so that the beneficiary can file a claim and avail of insurance coverage seamlessly.

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What is Term Insurance Claim Settlement Process (CSR)? 

Claim Settlement Ratio is the percentage of claims settled by an insurance company in a Financial year against the total number of claims made in the same year. This simply means that it is the claims paid against the claims made in the FY. For example, if you have selected a company with 95% CSR, this means that the insurance company has settled 95 claims out of 100. Apart from Sum assured, policy term, CSR is one of the important aspects that one should always consider before purchasing a term insurance plan. Every insurer has a claim settlement ratio that varies every year. 

Now, what is a good claim settlement ratio? Is a big concern these days. How to select a company based on CSR? So it is quite a simple concept. The higher the % of claims settled, the better are the chances that your claims will be approved and then settled without any hassle. CSR also determines the stability and the finances of a company. With the claim settlement ratio of 90% or above, an insurance buyer can be sure that the insurance company is safe and financially stable as they have cleared the claim amount of most of their customers. 

How Can You Calculate Term Insurance Claim Settlement Ratio? 

A Term Insurance Claim Settlement is computed with the following formula: 

CSR = (Total number of settled claims in a year/Total number of claims in a year) X 100 

For Instance, Company X settled 8,500 claims out of the 10,000 claims for 2019-20. So as per the formula, 8,500/10,000X100, the CSR will be 85%. 

Claim settlement of every insurance company is published by the IRDAI in their Annual Reports. You can check the CSR ratio of FY2019-20 on the IRDAI website. 

Importance of Claim Settlement Ratio in Term Insurance 

At the time of filling a term insurance claim, the amount of settlement that is provided by the insurer is the maximum benefit that a family/nominee receives after the death of the policyholder. If you are choosing an insurer with a high CSR, then you can expect the company to offer benefits to you and your family. This, in turn, make sure that you or your dear ones will not be affected by the life uncertainties and increasing living standard. It is advisable to choose an insurance company with a high claim settlement ratio that ensures a quick and hassle-free settlement Process.

  1. It assures your family’s financial protection 

    The main objective of buying term insurance is to provide financial protection against unfortunate events. However, it will be of no use if the insurer is not able to provide you claim easily. On the other hand, if the insurance company provides you a claim, then your family might have to go through a simple, transparent, and smooth claim process. 

  2. Specifies the reliability of the Insurance company 

    The CSR indicates the ability of an insurance company to pay the sum assured amount to you or your nominee/legal heir. If the insurance company is maintaining a high value of CSR over a long period, then they are reliable in paying claims smoothly and hassle-free. 

Claim Settlement Ratio of Term Insurance Companies in India 

As we have discussed, the claim settlement ratio helps determine the claim trustworthiness of the company. Below mentioned are the CSR for different term insurance companies as per IRDAI Annual Report 2019-20: 

Insurance Companies  Claims Paid in 2019-20 CSR 2019-20
Max Life Insurance Company  15342 99.22 %
HDFC Life Insurance  12509 99.07 %
Tata AIA Life Insurance  2954 99.06 %
DHFL Pramerica Life Insurance  560 98.42 %
Exide Life Insurance  3404 98.15 %
Reliance Life Insurance  7866 98.12 %
Canara HSBC Life Insurance  1252 98.12 %
Bajaj Allianz Life Insurance  11887 98.02 %
Aegon Life Insurance  344 98.01 %
ICICI Pridential Life Insurance  11212 97.84 %
Aditya Birla Sun Life Insurance  5035 97.54 %
Aviva India Life Insurance  790 97.53 %
Bharti AXA Life Insurance  1285 97.35 %
PNB MetLife Insurance  4241 97,18 %
Life Insurance Corporation Of India (LIC) 733809 99.69 %
Indiafirst Life Insurance 2166 96.65 %
IDBI Federal Life Insurance  1366 96.47 %
Kotak Mahindra 3225 96.38 %
Future Generali Life Insurance  1089 95.28 %
SBI Life Insurance  21257 94.52 %
Shriram Life Insurance  2816 91.61 %
Sahara India Life Insurance  585 89.45 %
Edelweiss Tokio Life Insurance  272 83.44 %

Information Sourced from IRDAI Annual Reports 2019-20 

**Disclaimer -Policyholder does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.

Types of Term Insurance Claims 

Term insurance is a pure protection plan that provides financial protection to your family in case of your unfortunate demise. Following are the different types of term insurance claims: 

  • Maturity Claim – It is a type of claim which is payable at the time of maturity of the term insurance plan. In this, a certain amount is paid to the life assured, if he/she survives till policy completion. You can get a maturity claim only if you are paying premiums on time. Policyholders are required to fill and submit a complete discharge form. The discharge is free of taxes as per the Income Tax Act, 1961. 
  • Death Claim – In this, the claimant raises a request for receiving the benefits in case of the death of the policyholder. In such cases, the sum assured is payable to the nominee/beneficiary upon the policyholder’s demise. To receive a claim amount without any hassles, the insurer is required to be informed about the death and the other information such as policy number, death date, and the tenure of the policy till when the company is responsible for compensation. The death benefits are also tax-free U/S 10(10D) of the Income Tax Act, 1961. 
  • Rider Claim – Term insurance riders are the additional benefits that the life assured can avail at the time of purchasing a term insurance plan by paying an extra amount. Some of the common term insurance riders are Waiver of Premium Rider, Critical illness rider, Accident, and Total Permanent Disability Rider. The nominee is allowed to raise a claim for any of the above-mentioned riders which are purchased by the policyholder on his/her behalf.

Term Insurance Claim Process

There are many different steps involved while filing a claim on a term insurance plan. In case of unfortunate death of the insurance holder, the dependents (family members) or beneficiaries under the term insurance policy should inform the insurer as soon as possible. To support the claim filed, it is necessary to submit all the required documents. However, before intimating the insurance company, the beneficiary should keep some important facts in mind.

  • The insurance policy should be in force and all the premiums should be paid dully.
  • The specific situation for which the claim is filed should be covered under the term insurance.
  • Policy exclusion.

Step by Step Process of Term Insurance Claim Settlement

  1. Inform the Insurance Provider About the Claim

    In order to enable the insurer to start the process of claim, the nominee should inform the insurance company as soon as possible. The required details for the intimation of claim are the name of the policyholder, policy number, date of birth of the insured, place of death, the cause of death, the name of the beneficiary, etc. The beneficiary can avail of the claim form either from the nearest branch of the insurance company or can even download it from the website of the insurance company. Moreover, the beneficiary can also fill the form online and file the claim.

  2. Documents Required

    The documents that should be kept handy while filing the claim are:

    • Death certificate
    • Age of the policyholder
    • Original documents of policy
    • Any other documents according to case-related or according to the requirement of the particular insurance company

    If a claim is made within the 3years of policy issued, the insurer does an additional investigation in order to ensure it is a genuine claim. Following checks should be done: 

    • Check with the hospital whether the demised person was admitted to the hospital or not.
    • In case of confirmation of a flight crash from the airline authorities, the insurer checks with the airlines whether the insurance holder was the passenger of the flight or not.
    • In the case of the death of the insured due to any critical illness, the insurance provider will ask the hospital to make available the details like medical records, doctor’s certificate, etc.

    In case the insurance holder dies due to suicide, murder or accident then panchanama, police FIR report, and post mortem report will be required.

  3. Submission of all the Important Documents for the Processing of Claim

    The beneficiary should submit all the required documents as early as possible to speed up the claim process and avoid any delay.

  4. Settlement of Claim

    According to the Insurance Regulatory and Development Authority (IRDA) of India, it is mandatory for all the insurance companies to settle the claim within 30 days. The claim should be settled by the insurer from the date the beneficiary submits the claim form along with all the required documents. In case, the claim requires additional investigation then the insurer is obligated to complete the process within 6 months from the date of receiving the written intimation of the claim.

Formalities for A Maturity Claim 

Upon the maturity of the insurance policy, the insurer generally sends an intimation to the life assured along with a discharge voucher for at least 2-3 months in advance of the maturity date providing details like the payable maturity amount. 

The life assured is required to sign the discharge voucher – a receipt and then sent it to the insurer along with the original bond of the policy to make payment. If the policy has been allocated in favour of any other person or object- such as a housing loan company. The claim amount will be payable to the person who is the assignee and that individual will give the discharge. 

Important Inclusion and Exclusion

Term insurance coverage applies to both unnatural and natural death. In the case of suicide, the claim is settled after one year of taking the policy. Inclusion and exclusion of the policy depend upon the risk factor of the policyholder. Thus, the benefit of non-smokers will be different in comparison to that of smokers. However, most of the benefits offered by term insurance plans will remain same and the coverage varies from plan to plan.

Documents Required for Term Insurance Claim Submission

  • Completely filled claim form (provided by the insurer)
  • Death certificate (an original and attested copy issued by local municipal authority)
  • Original policy documents
  • Deeds of re-assignments/assignments if any
  • Photo of the nominee, ID proof like PAN card, Aadhar card, passport, etc.
  • Last medical attendant physician certificate
  • Medical records (admission notes, death/ discharge summary, test report, etc.)
  • Post-mortem report, if any

What Are The Common Reasons for Rejecting the Term Insurance Claim? 

Though the process to raise a claim is quite easy and convenient but still, it gets rejected sometimes because of the following reasons:

  • If in case a policyholder has provided wrong information to the insurer in the application form.
  • If the policyholder has not paid the premiums on time or the policy is renewed within the grace period
  • The policyholder’s nominee makes the fraudulent claim to gain the amount of the claim
  • If the reason for the death is excluded from the term insurance policy that might be suicide before the completion of 1st policy term, accidental death because of the drugs, alcohol, or any other related substance.

How You Can Avoid the Term Insurance Claim Rejection? 

  • Do not give False Information – Fill in all the details such as age, lifestyle habits, earnings, qualification, previous policies, and claims carefully and correctly. 
  • Reveal Medical History – Inform the insurer about your previous and existing medical situations, surgeries, etc. The health history of family members is also disclosed if required by the insurance company. 
  • Update the Information of Nominee – Nominee receives the death benefit, so it is very important to update the insurer about the details of the nominee. 
  • Payment of Premiums on time – It is required to pay premiums on time. And, if somehow you fail to pay a premium, then you can use the grace period to pay the unpaid premium. Direct debt facilities can also be chosen to make sure that your premium is paid. 
  • Disclose the Information about the Existing Policies – While buying a new term plan, make sure to disclose all the existing life insurance policies. Hiding the previous policy information might result in the claim rejection. 

Disclaimer – All Savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T & C applies.

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