How to Claim Term Insurance After Death?

Stepwise process explaining how to claim Term Insurance after the policyholder’s death

Here’s a list of steps that are needed to be followed by the beneficiary to claim the death benefits after the death of the policyholder. Note that this is an overview; the exact steps and the process will depend on the insurer.

Step 1: Notifying the insurer

This is the first step that the beneficiaries have to take in order to claim a death benefit.

The beneficiary can use the customer service number, or visit the branch or email the respective insurance provider to inform the policyholder's demise.
The beneficiary will be requested to disclose the name, latest address, date of birth, and reason for the policyholder's death. The name, contact details, and how the beneficiary is related to the policyholder also have to be cleared out.
Not just that, the beneficiary is also expected to know the policy number (which will be found in the policy documents) and other relevant documents needed to file a claim. In some cases, the insurance provider may ask for an original death certificate to validate the death.
Notification regarding the policyholder's death must be made within the time limit set by the insurance company. However, this limit may differ from company to company. The time limit followed by most insurance companies is usually 30 days from the date of death of the policyholder.

Step 2: Fill out and submit the death claim form

The death claim form has to be duly filled out with all aspects, including name, age, the reason for the death of the policyholder, and other relevant information as required by the insurance company.
Keeping all the necessary documents in hand will ease the process of filing the death claim form.
If no beneficiaries are assigned, then the claimant has to prove that they are legally entitled to receive the claim.
Once all the necessary details are filled in, it is time to submit the form. The beneficiaries can submit the form either by heading to the home branch where the policy was issued or through online mode, if available.

Step 3: Submit all the relevant documents

All the required documents requested by the insurance provider must be submitted to continue the claim process.
The documents needed will depend on the kind of death undergone.
These documents typically include the original or a certified copy of the death certificate, the policy document, any medical records related to the cause of death, and proof of identity and relationship of the beneficiary to the deceased.
It's essential to gather these documents as promptly as possible to avoid delays in the claim process. If the death was due to an accident, additional documents, such as a police report or an autopsy report, might be required.
Each document helps substantiate the claim, ensuring the insurance provider has all the facts needed to evaluate the claim. Careful attention to completing this step thoroughly can significantly smooth the subsequent processing and evaluation stages.

Step 4: Evaluation of the claim by the insurance company

Once the insurance company receives all the documents needed, they will start the process of evaluating and analysing the documents.
The insurance company will verify all the documents submitted, including medical reports, police records and other necessary documents.
The evaluation process for each kind of death will be different. For example, detailed investigation time may be required if the policyholder has died within 3 years of buying the policy.
At this stage, the insurance company will decide if the claim has to be settled or rejected. If the claim is accepted, the insurance company will payout the death benefit. If not, the reason for the rejection will be stated.

Step 5: Settlement of the death Claim

After the claim has been accepted, the insurance company will settle the claim amount to the beneficiary either in a lump sum or in instalments, concerning terms and conditions.
This claim amount will be deposited directly to the beneficiary's bank account.
Beneficiaries must understand the tax implications of receiving a death benefit, which can vary depending on local laws. Beneficiaries should also be prepared for any potential financial planning required once the funds are received.
This might include consulting with financial advisors to ensure the money is managed wisely, potentially setting up trusts or investments, and considering how the funds can best contribute to the beneficiary's long-term financial stability and goals.

What happens if the policyholder survives the term?

If the policyholder outlives the term, no payouts will be made (unless there’s a Return of Premium add-on as a part of the coverage), and the policyholder will have to renounce the coverage. This is because standard term life insurance is designed primarily to provide financial security to the policyholder's beneficiaries in the event of the policyholder's untimely death during the policy term. Therefore, if the policyholder is still alive when the policy expires, the insurance coverage ends, and no payout is issued.

However, some term life insurance policies have an optional feature, the Return of Premium (ROP). This add-on benefits those seeking a safety net if they outlive their policy. With an ROP feature, all or a part of the premiums paid during the term are returned to the policyholder if they survive the policy period. It's important to note that policies with ROP typically cost more than those without this option due to the potential for the insurance company to return the premiums.

Once the policy term ends and if the policyholder does not have the ROP feature, they must decide whether to purchase another policy to continue life insurance coverage or forego it. This decision often depends on the individual's life circumstances at that time, such as financial responsibilities, dependents, and overall health.

What are the types of deaths covered by Term Insurance plans?

Not all kinds of deaths are allowed to be claimed under the Term Insurance plan. Here’s a generic list of deaths which will and will not be covered in term insurance plans. The exact list will depend upon the policy’s terms and conditions.

Natural death/medical condition
Accidental Death
Deaths due to pre-existing diseases (declared at the time of buying the policy)
Deaths due to critical illness
Health-related death
Deaths due to COVID-19
Death by suicide

Death due to indulging in illegal activity
Deaths due to pre-existing diseases (not declared at the time of buying the policy)
Death due to driving under the influence of alcohol/drugs
Self-inflicted injuries
Death due to suicide
Death due to indulging in hazardous activities
Death due to taking part in adventurous sports (if not informed while purchasing the policy or don't have a respective add-on)
Death due to childbirth or complications in pregnancy
Death due to sexually transmitted diseases (like HIV)
Death due to intoxication
Natural disaster

What are the documents required to file a claim after a policyholder's death?

These are the documents that are to be submitted by the beneficiaries in order to claim the benefits of the term insurance, disregarding the type of death met.

Original policy documents
Correctly filled claim form
Original death certificate, either signed by the medical practitioner or issued by the government civil authority
Statement from the beneficiary regarding details about themselves and the policyholder.
Identity proof of the beneficiary (Aadhaar Card, Voter ID, PAN Card, Passport, etc.)
Age proof of the policyholder
Cancelled cheque and NEFT mandate

Not just these, but additional documents might be required as per the cause of death.

Case 1: If the policyholder had died due to medical illness

In this case, the insurance company would require documentation substantiating the medical cause and history. This typically includes:

Doctor’s Statement: This is a formal document from the physician who last treated the policyholder. It outlines the medical condition that led to the death, including critical details about the diagnosis, treatment timeline, and the ultimate cause of death.
Proof of Treatment: Hospital records or treatment notes provide evidence of the medical care the policyholder received. These documents should include details about the admission to the hospital, medical tests conducted, treatments administered, and the duration of the treatment.

Case 2: If the policyholder had died due to accident or unnatural death

In cases of death resulting from an accident or unnatural causes, the documentation required is more extensive, often involving legal and police reports:

Registered Copy of the FIR (First Information Report): This is a crucial document filed with the police detailing the circumstances of the accident or incident leading to death. The FIR initiates legal proceedings and is a primary document used to establish the facts of an accident or crime.
Post-mortem Report: Also known as an autopsy report, this document is prepared by a forensic pathologist. It provides a thorough analysis of the cause of death, showing whether it was due to external injuries, trauma, or other factors typically associated with unnatural deaths.
Police Investigation Report: This report compiles the findings of the police investigation into the death. It includes witness statements, circumstances of the incident, and conclusions from the police on how the death occurred.

What are the reasons for the insurance claims to get rejected?

When filing an insurance claim, policyholders and beneficiaries must understand the common pitfalls that might lead to a claim being rejected. Here are the various reasons why an insurance claim might not be approved:

Contradicting Information

This occurs when the information provided in the claim form conflicts with the details initially provided when the policy was taken out or with documentation submitted at other times. For example, if the cause of death in a claim contradicts medical records or an autopsy report, the insurer might reject the claim due to inconsistencies.

Falsifying Information

Providing false information to an insurance company is a severe offence and can lead to the rejection of a claim. This might include lying about the policyholder's health status, the circumstances of death, or any other pertinent details that would affect the insurer's decision to cover the risk or pay the claim.

Delay in Premium Payment

Insurance policies stipulate that premiums must be paid regularly to keep the insurance active. If there are missed payments and the policyholder still needs to arrange for a grace period or reinstatement of the policy, any claim filed under such a lapsed policy is likely to be rejected.

No Mention of Nominee

If the policy does not have a nominated beneficiary or the nominee's details need to be updated or mentioned, it can complicate the claims process. This oversight might delay or even result in the rejection of the claim, as the insurer may need to verify who is legally entitled to receive the claim amount.

Undisclosed Medical Records

If a policyholder fails to disclose significant medical conditions or previous health issues when purchasing the insurance, the company may view it as non-disclosure or misrepresentation. This is particularly critical if the undisclosed condition is related to the cause of death, leading to potential claim rejection.

Undisclosed Previous/Existing Insurance Policies

Not disclosing other existing insurance policies can be seen as an attempt to over-insure, which can be a red flag for fraud. Insurers often require information about other policies to assess the policyholder's total coverage and evaluate the risk accurately.

Lapsed Policy

A policy lapses when the premiums are not paid within the specified time, leading to the termination of the policy's benefits. A claim made under a lapsed policy will only be entertained if the policy is reinstated, which usually requires paying all overdue premiums and undergoing any additional underwriting procedures required by the insurer.

Frequently Asked Questions (FAQs)

Here’s a list of FAQs associated with how to claim Term Insurance after a policyholder's death.

Are there tax benefits for the premium amount paid by the policyholder for a Term Insurance Plan?

Yes, the policyholder can avail tax exemption up to one and a half lakh rupees as per applicable terms and conditions.

Can I get my money back if I survive the term insurance plan?

If you have opted for a Return Of premium rider, then you will be qualified to get back the premiums paid.

Can I take a loan on the Term Insurance Plan I opted for?

No, since such plans do not offer a cash value component at maturity.

Can the nominee be changed after the policy has started?

Yes, you can change the nominee of your term insurance policy at any time during the policy term. To do this, you must fill out a nominee change form and submit it to your insurance company. Keep a copy of the updated nomination form for your records.

Is there a waiting period for term insurance policies?

Yes, most term insurance policies have a waiting period, typically lasting from a few months to a couple of years from the start of the policy. During this time, certain causes of death (like suicide or certain natural causes) may not be covered. Always check your policy details for the specific waiting period terms.

Can I increase the sum assured during the policy term?

Some insurance policies offer the flexibility to increase the sum assured, typically after significant life events such as marriage or the birth of a child. However, this feature varies by insurer and policy, and additional underwriting might be required. You can check out the ACKO Life Flexi Term Plan, a unique plan offering flexible coverage per your changing lifestyle!