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Claim Settlement Process of Term Insurance Plans

Term Insurance plan is a life insurance plan that offers financial cover to the family if the policyholder passes away in unfortunate circumstances. The beneficiary can initiate the claim settlement process of the term insurance plan immediately, and once settled, they can decide in which way they want the sum assured to be dispersed – it can either be as a lump-sum amount or by way of regular monthly payments. The life cover offered under term insurance plans is for a specific period.

Benefits of Term Insurance Plans?

Term insurance plans offer financial benefits in the following ways: 

  • The policy provides lump-sum sum assured in case of death of the policyholder.
  • These plans also offer a lump-sum amount in case of critical illness.

  • It provides financial payments if the policyholder suffers from critical illness or disability.

  • The term insurance plans offer additional sum assured if the policyholder purchases riders like Accidental death benefit on the basic policy.

The premiums on term insurance plans can be paid monthly, half-yearly, yearly, or quarterly. While the minimum entry age of term insurance plans is 18 years, the maximum age is 65 years. Term insurance plans also enjoy tax benefits under section 80C and section 10 (10D) under the Indian Income Tax Act of 1961. These plans also offer flexibility to policyholders to choose what kind of plan they want. They can choose from single life term plans and joint life term plans.

What is the Claim Settlement Ratio?

The sole purpose of purchasing a term insurance plan for the policyholder is to ensure that his or her near and dear ones are financially secured when they are not around with them anymore. One has to make sure that his or her family gets the sum assured easily without running from pillar to post, for that individual should do thorough research to determine which insurance provider offers the best claim settlement ratio and approves the claims fairly swiftly.

The Insurance Regulatory and Development Authority (IRDA) bring out the 'Death Claim Settlement Ratio' report every year, which shows which insurance provider is settling the claims quickly. The higher the claim settlement ratio is, the more trustworthy the term insurance provider is. 

The claim settlement ratio is the ratio of claims that the insurance providers settle for every 100 requests received by them.

A higher percentage of death claim settlement ratio shows that the insurance provider can be trusted when it comes to approving the claims made by the beneficiaries of the term insurance plan.

How to Initiate the Claim Settlement Process of the Term Plan?

In a bid to initiate a claim settlement process, the family members of the beneficiary of the term insurance plan must immediately inform the insurance provider about the death of the policyholder. It is also essential to ensure that the nominee has all the important documents ready. Given below are the steps that the beneficiary has to take to ensure a smooth claim settlement process of the term plan.

  • Immediately inform the Insurance Provider about Death

    The first and foremost step to file the claim is to inform the insurance provider about the unfortunate demise of the policyholder as soon as possible, either through phone, email, or by visiting the insurance provider’s branch office. Then they will have to download the claim settlement form or can collect it from the branch office.

  • Submitting Important Documents

    After duly filling the form, the nominee will have to submit all the important documents required to initiate the claim. The list of documents is as follows:

    • Duly filled up the claim form
    • Original death certificate
    • Original term insurance policy documents
    • Passport size photograph of the nominee
    • Nominee’s id proof like Aadhaar card, PAN Card, Passport, etc.
    • Post mortem report of the policyholder
    • Medical records like test reports, admission proof, discharge or death summary
    • A certificate from physician/hospital that attended the policyholder confirming the cause of death
  • Final Claim Settlement

    The final step in the claim settlement process of the term plan is to decide how the claim has to be settled. After the nominee has submitted all the essential documents to the insurance provider, the claims settlement department will take it over to verify the documents before approving the clearance of the policy amount. 

    After the verification is completed and everything is in place, the insurance provider will approve the claim. However, if they find any discrepancy in the claim or proof, they have all the right to reject it.

  • Exclusions from Term Insurance Plans

    There are certain factors or situations under which the claim settlement process of term plan may get rejected. These factors are known as exclusions. If the policyholder dies during the following circumstances, the nominee will not be entitled to get any claim amount. These are:

    • If the policyholder dies after committing suicide within 12 months of the policy's inception, the beneficiary will not be able to file for a claim. However, the policyholder's premium amount will be given back to his or her family members after deducting taxes.
    • If the policyholder dies in an accident under the influence of drugs or alcohol, his or family will not be able to file for a claim.
    • The nominee will not get any claim amount if he or she dies while participating in adventurous sports.
    • The beneficiary will not get any claim benefits if the policyholder dies in an accident due to car or bike racing.

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