A term insurance policy helps financially secure your family in case you are no longer around. But, first, what is a term plan really? It is a pure protection plan that offers a death benefit in case of the demise of the policyholder. Term insurance makes large amounts of sum assured accessible to people because it has lower premiums than most other types of life insurance policies. The whole premise of term insurance is to receive a payout in the event of the policyholder’s death. Hence, it is essential to understand what the claim settlement process is before you buy a term plan.
- Filing the claim
The beneficiary or the nominees of the term insurance plan will have to inform the insurance company about the policyholder’s demise and file the claim. This can be your spouse, children, parents, or another family member. It is best to inform the insurance company as soon as possible so that the claim settlement process can be initiated, and the funds can reach the nominees at the earliest. Most insurers have the claim form available online on their website. Alternatively, one could also visit their branch and fill out a physical form.
- Documents required
In addition to the claim form, there are certain other documents needed. These primarily include the death certificate and the policy documents in addition to the identity and address proof of the nominee. There might be some additional documents required depending on the insurance provider that will be specified in the policy documents at the time of purchasing the term insurance. In case the policyholder passes away within three years of purchasing the term insurance plan, the insurer may investigate to confirm the circumstances of death. Depending on the cause of death, an FIR, post-mortem report, medical records, doctor’s certificate etc., may be required.
- Claim settlement period
All insurers have to settle the term insurance claim within 30 days from the date of filing. This is as mandated by the Insurance Regulatory and Development Authority of India (IRDAI). If there is a need for additional investigation, however, the insurer can take a further 60 to 90 days to make the payout. In case the insurance company takes more time, it will be liable to pay interest as a penalty on the claim amount to the nominees.
Things to keep in mind
There are some important things that you should consider when buying a term insurance plan to prevent claim rejection later:
- Read the terms and exclusions of the policy very
carefully. Not all types of deaths are covered by term insurance. For instance, death due to hazardous activity such as
adventure sports may not be covered.
- While filling out the term insurance application form at
the time of purchase, make sure to reveal all information honestly. Any non-disclosure
or incorrect information, either intentionally or by mistake, will be treated
as misrepresentation and will lead to claim rejection later.
- Make sure to pay your premiums regularly as per your
premium payment term. In case you miss out on your premium payment, you will
receive a grace period of 15 to 30 days, depending on your insurer. In case you
fail to pay your premium during that time, your policy will lapse, and you will
no longer be covered.
- Circumstances such as accidental death, critical illness,
accidental disability, etc. are offered as additional riders to your base term
insurance policy. Opting for them makes your policy more comprehensive and you
should consider them.
- When selecting a term insurance plan, you shouldn’t make
the decision solely on the premium. You should also look into the features and
benefits of different policies and then make your decision. To get an idea of
the premium you will need to pay for your desired sum assured, you can take the
help of a term insurance plan
calculator. Most insurance
companies have such a calculator on their website for easy access.
- Check the claim settlement ratio of the insurance company before opting for the term policy. This ratio shows you how reliable the insurer is when it comes to settling a claim. The higher the ratio, the better it is. You can find the claim settlement ratio for different insurance companies on the official website of IRDAI.
A term insurance policy is an essential financial product to include in your portfolio because it protects your family’s future as well as the wealth you’re building. It helps ensure that your savings and investments don’t get depleted completely to meet your family’s expenses and needs once you’re no longer around. Make sure you understand the claim settlement process of the insurer well before you purchase the policy. Also, ensure to explain the same to your nominees since they are the ones who will have to take care of this.