Planning for life is like navigating a maze - you need to take your time to carefully plan each step and make sure you’re heading in the right direction. And, term insurance is a viable option for future planning. It is an ideal choice for those seeking financial protection for their family at an affordable price.
It is a pure risk cover, so if you survive till the end of the policy duration, it won’t pay any benefits to you. And, if you pass away while the policy is active, the insurance company will pay a sum of money to your family as per the claim payout option you selected. This sum of money will replace your income to secure your family’s financial needs, without compromising their dreams and lifestyles.
However, despite its benefits, potential obstacles can impact the claim. Therefore, it's important to be aware of the specifics of your policy before signing on the dotted line. In this article, we'll discuss a list of things that can affect a term insurance death claim -
4 Things That Can Affect Your Term Insurance Death Claim
The following factors can significantly impact the death claim -
1️⃣Incorrect Declarations
When applying for term insurance, you must provide certain details to your insurer, such as your name, age, address, educational background, occupation, etc. Additionally, you will be required to provide details about your and your family's medical history, any underlying medical conditions you may have, surgeries/treatments you may have undergone, etc. Your application will also require several supporting documents and several other documents such as proof of identity, proof of income, etc. Make sure you double-check that all of the information and documents you provide are up-to-date, as any discrepancies can put your family's claim at risk.
Important Note:
Section 45 of the Insurance Act ensures that a term insurance death claim cannot be contested after three years of continuous coverage. However, insurers have been known to investigate the cause on ground. Any discrepancies in the proposal form or documents may lead to contested claims, causing complications for your family. To prevent such issues, provide accurate information in the proposal form and maintain up-to-date, well-organised documents for a smoother claims process for your loved ones.
2️⃣Policy Exclusions
Exclusions are situations that aren't covered by the policy. Term insurance claims can also be affected by exclusions. This means that it is essential to carefully read and understand the exclusion clauses in the policy before signing it. Under term insurance, all types of death are covered except suicide during the first year of policy purchase. Thus, a suicide-related claim within a year of purchasing the policy will not be honoured by the insurance company. In this case, the insurer will return the premiums (without taxes) to your nominee.
Similarly, in Saral Jeevan Bima, there is a 45-day waiting period before coverage begins. On the other hand, if you have included riders in your policy, they may have exclusions as well. For instance, a term insurance plan does not exclude death caused by adventurous activities, but an accidental death benefit rider excludes it. So, understanding and informing your family about all the clauses and exclusions that apply to your term insurance policy and the riders you add to it is essential to ensure a hassle-free claim process. Taking this step will give you peace of mind in knowing that your family is adequately protected.
3️⃣Documentation Issues
In the unfortunate event of your passing, while the policy is active, your nominee must notify the insurer. The insurance company will ask them to submit several documents and fill out a claim form. Depending on the product and the cause of death, your nominee may also be asked to submit additional documents. Once the documents have been verified, the insurer will process your family’s claim, ensuring they receive the benefits promptly. However, the claim may be rejected if the documents are improper or contain discrepancies.
It is important for you and your nominee to understand the claims process, as different insurers may have different requirements for filing a claim. Make sure to ask your insurance provider for a comprehensive list of documents that may be required for the claims process, as this will ensure your nominee will be well-prepared - should the need arise. Once the list is in hand, gathering all the documents and storing them securely is important.
✏️MyInsureBuddy Tip:
You can set up an e-insurance account, register with Digilocker, and store your documents there. Share the account details with family members in advance so they can have ready access to all documents in case of a claim.
4️⃣Missing The Premium Payments
If you wish to keep your term insurance plan active, you must make regular payments under it. If you miss a premium payment due date, the insurance company will allow you to make the payment within a grace period. Failure to make the premium payment within the grace period will result in the policy lapsing, and you will no longer be eligible for any benefits under the policy, unless you revive it.
Should you pass away when your policy is in a lapsed state, your nominee files a claim, it will be rejected. There have been instances where family members, unaware of the policy lapsing, applied for a claim, only to have it rejected by the insurance company. Therefore, it is important to stay up to date on your payments to ensure that your nominee can take advantage of the benefits you have worked so hard to secure.
✏️MyInsureBuddy Tip:
Set up an auto-debit in your bank account and not on your credit or debit card, as cards come with expiry dates. This ensures your premiums are transferred directly to your insurer on time.
Summing up!
It is essential to have an in-depth knowledge of these aspects and to ensure that all the requirements are fulfilled to guarantee a hassle-free death claim process for your family. Furthermore, you should also make your family members aware of these conditions and details so that they can avoid any issues when making a claim.
Schedule a free 1-to-1 consultation with our top-notch financial advisors at MyInsureBuddy. They are ready to lead you and your family through every step, from selecting the perfect policy to effortlessly navigating the claims process. In the face of challenges, rest assured they'll be by your family's side even in your absence.