What is a term insurance claim?
Every term insurance comes with some benefits. These benefits are selected by the insurance buyers depending on their requirements. A policyholder buys a term insurance policy for a certain period and pays premiums for the decided time so that their family can use up the policy's benefits after his/her death during the policy tenure. However, how does one get these benefits? They can be acquired through different types of term insurance claims.
Suppose the policyholder passes away. In that case, the policyholder’s family has to approach the insurer and file claims to get the policy's rightful benefits. These claims are called term insurance claims. In other words, it can mean the insured asking for the returns of the policy for which they paid the premiums.
Types of Term Insurance Claims
There are not one but several benefits that term insurance can offer. However, they serve different purposes, and hence, the claim for each of these benefits is also different. Typically, there are three types of term insurance claims that are common in almost all the term insurance policies available in the market. They are:
- Death benefit claim
- Maturity benefit claim (Only in case of Term Insurance with Return of Premium or TROP)
- Rider benefit claim
It is essential to mention that it's not a compulsion for every policy to offer all of the above benefits, based on which the claims can be made. It depends on the type of insurance bought by the policyholder. For example, some term insurance policies only offer a death benefit, while some only offer maturity benefits with a death benefit.
The rider benefit depends upon if the policyholder had selected any riders in his/her term insurance policy. Then, depending on the range of benefits a policy offers, the premium rates are decided.
Though most people would prefer to get the maximum possible benefits from insurance during claims, it should be kept in mind that claims can be made based on only what the policy can offer.
Death Benefit Claim
The main aim of term insurance is to provide financial protection to the policyholder's family after his/her death during the policy term. Therefore, a death benefit in term insurance is the amount of sum assured by the policy that the insured's family or nominee is entitled to get after the policyholder passes away before the completion of the policy tenure.
The death benefit of any term insurance usually includes:
The family can receive the entire amount of the death benefit after they file the death claim, as a lump sum amount or in parts from time to time. It would depend on what method of reimbursement was chosen by the policyholder while buying the policy.
Maturity Benefit Claim
The death benefit in term insurance pays only after the death of the policyholder during the policy tenure. However, what if the policyholder survives the policy term? In this case, the policy has matured, and the policyholder does not receive any maturity benefit upon claiming the insurance. Provided the term insurance policy is of ‘Term Insurance With Return of Premium (TROP)’ type.
This means, if the policyholder has selected a term plan with a return of premium feature, then he/she is entitled to claim his/her paid premiums in the form of maturity benefits if he/she survives the policy term.
However, as a rule, this benefit will be acquired by the insured only if they claim the insurance. Another rule of getting the maturity benefit is that all premiums must have been paid on time in the past.
Rider Benefit Claim
Riders are additional benefits that are purchased along with the policy. They are valuable benefits focused on specific areas. There are several riders offered by insurance companies, and adding as many as them causes the premium cost to go up. However, they are beneficial, and if chosen wisely based on the requirements, they can prove to be extremely helpful at times of need.
As already said, riders offer benefits that are focused on specific areas. Therefore, they can be claimed when those situations arise in life. They can be claimed during the policy term or after the policy term. An important thing to remember is these benefits are distinct from the death or maturity benefits. Hence, for acquiring them, one has to claim them separately from the death or maturity benefit. Common riders for a term insurance plan are critical illness riders, accidental death riders, waiver of premium riders, etc.
Documents Required for Claiming Term Insurance
Every official work requires documents. Therefore, the necessary documents for filing different types of term insurance claims are:
- The original insurance policy.
- Death certificate of the policyholder, in case of death benefit claim or for claiming rider benefits that can only be claimed in case of the policyholder's death.
- The copy of reports of post-mortem, if conducted.
- Copy of medical history.
- The identity proof of the person making a claim.
- The address proof of the person making a claim.
- The carefully filled claim forms.
- A copy of a canceled cheque.
How Are Term Insurance Claims Settled?
The claim settlement is usually a three-step process which is as follows:
- Step 1: Letting the insurance company know about the claim through the claim forms. It should be done as soon as possible, with accurate details being submitted along with the form. These details usually include the details of the policy and the policyholder (in case it's the nominee filing the claim). In addition, in the case of a death benefits claim, the details such as place, time, and cause of death should be mentioned.
- Step 2: After intimating the insurer, the next step would be to submit all the documents as per the terms and conditions of the insurance company. All these documents must be authentic as only after proper verification, the claim process is initiated. Any faults found in the documents can directly lead to the rejection of the claim.
- Step 3: The last step is the insurer's responsibility as it will now be the company's duty to settle the claim within one month after the verification of the documents is made.
Common Reasons for Claim Rejection
Let us look at the most common reasons that why are claims rejected by insurers:
- The most common reason would be the policyholder’s failure to produce all required documents.
- The person making a claim puts forward wrong information in the claim form, intentionally or unintentionally.
- The insured didn't have complete knowledge of the policy, such as the cause of deaths covered under the policy, etc.
- Any critical information was left out while purchasing the policy, such as existing illness.
- There was a lack of transparency between the insurer and the insured.
- The claimant tries to cause any fraud only to gain the claim amount.
Ans. In this case, the policy is stopped, and the family or the nominee is paid the death claim.
Ans. They must have read all the terms and conditions of the policy correctly while purchasing the policy. While making a claim, utmost authenticity must be upheld.
Ans. One can acquire the claim forms from the branch office of the company, or one can directly download them from the insurance company's website.
Ans. By rule, an insurance company has to settle the claim within one month. In case the procedure takes time, the company can take a maximum of 6 months.
Ans. If nobody claims the insurance, then all the premiums paid and all the policy benefits stay unutilized.
Written By: PolicyBazaar