- Date : 10/05/2022
- Read: 5 mins
Events like death are uncertain in life and having a term life insurance can become your family’s financial supporter in that case. Through this blog, you will know about the considerations to make for insurance claims to be settled so that your family can be financially protected.
One of the best investments in today’s time is having insurance, be it life insurance, health insurance, or motor insurance. Events like death are uncertain, and having a term life insurance can become your family’s financial support in that case. Term life insurance is a kind of life insurance that allows the family members or specified nominees to claim the guaranteed monetary benefits if the death of the policyholder occurs in the specified term. Upon the expiry of the term life insurance, the policyholder gets three options - to renew the insurance, convert it into permanent coverage, or terminate it.
Make term insurance claims hassle-free for your nominee
When people gain term insurance, they have two expectations. First, the insurer must pay the money. Secondly, they must pay it without delay. For the insurance claims to be settled, disclosures must be accurate, and the policyholder must pay premiums on time. Even after following these instructions, further obstacles may complicate filing a claim. Here are some considerations to make your family's experience as pleasant as possible.
STEP 1: Organise all the documents related to the insurance policy
You should maintain your policy and all other critical paperwork in a safe, secure location and notify your nominee.
Documents required for submitting the term insurance claim
- Claim Form to be filled by the nominee.
- Original and attested copy, issued by the government, of the death certificate of the person.
- Complete set of documents of the original term life insurance policy submitted by the policyholder.
- The government recognised identity proof documents like PAN, Aadhar Card, etc., with passport-sized photographs.
- Medical reports (if any) including health test reports, medical treatments, admission and discharge summary of the hospital, doctor’s certificate, etc.
- FIR, autopsy report, etc. if the cause of death of the policyholder is accident or murder.
You can also set up an e-insurance account to store all relevant documents digitally. Share the account information with your nominee to ensure that they have ready access to the documentation when filing a claim.
STEP 2: Walk your nominee through the procedure to claim insurance
The most crucial step is to sit down with your nominee, walk them through the claim settlement procedure, give them a list of documents they'll need to submit, etc. If you purchased the insurance through a financial advisor, connect them with your nominee.
STEP 3: Purchase The Term Life Insurance Under The Married Women's Property Act
Several laws state that your creditors have the right on the claim amount, and only after they have settled the debts will your nominee get to claim the rest of the money. In other circumstances, during term insurance claim settlement, relatives try to stake a right on the payout received by your nominee. If you are married and want to make sure that all rights to the payout belong to your wife and children at the time of claim, then purchase the policy under The Married Women's Property Act.
STEP 4: Be Careful While Choosing The Claim Payout Option
After you pass away, your nominee will receive your term insurance claim and suddenly have a large sum of money in their account. Managing this much money is a cumbersome task. Choose a claim payout option that best suits your needs to ensure that the money is used correctly and becomes helpful.
You may also like to know about how an NRI can buy a term insurance plan in India.
Term Insurance Claim Settlement Payout Options
To make the process hassle-free, the following are the term insurance claim settlement payout options that you can choose from:
1) Lump-Sum Payout
A lump-sum payout means that the insurer will pay the total amount. This option is best suitable in cases where you've debts and loans to settle. Once your nominee gets the payment, they can use it to pay off everything and live a debt-free life. It also works in cases when your nominee knows where and how to use this large sum of money.
2) Monthly Income Payout
In the Monthly Income Payout option, the insurer will pay the amount to the nominee in monthly instalments for a particular period. This option is best suitable when you do not have loans to settle and want to ensure that your family members receive regular and sustainable income each month for daily living expenses.
3) Lump-Sum and Monthly Income Payout
Another option is a combination of the options mentioned above. In this type of combination, the insurer will pay a fixed amount to your nominee in one go, while the rest of the amount will be paid in the form of monthly instalments. This option is the best choice when you've loans and debts to settle. Besides, your family will receive monthly expenses for future needs.
Things To Keep In Mind To Avoid The Rejection Of Term Insurance Claims
Make sure that the information that you provide is accurate and up to date. If you are intentionally hiding any material facts like your health issues or misrepresenting your medical history, allergies, etc. then the insurance company has the right to reject your claims. Sometimes this may also amount to fraud.
Grace period is 30 days over the expiry of one term of the insurance. Once the grace period expires and you did not pay your premiums, the insurer will not release any claims.
Keep the information of the nominee regularly updated; inform the insurance company in case of changes. If the nominee dies before the policyholder, the nomination becomes void. In that case, you should update the details of the new nominee as soon as possible.