MODULE – 3
INSURANCE TRANSACTION DOCUMENTS
What is a life insurance policy, and what are its key features?
A life insurance policy is an agreement between an insurance company and a
person (or legal entity).
Most insurance policies identify the following:
The insurer: Only certain companies can provide life
insurance, and these companies are regulated by state
insurance departments.
The policyholder: The person or entity (such as a family
trust or a business) which owns (or “holds”) the policy. The
policy can insure the holder, or it can insure another person.
The insured: The person whose life is insured.
The death benefit: The amount the insurer will pay when the
insured passes away.
The beneficiaries: The people or entities that will receive the
death benefit. It can all go to a single person (e.g., a surviving
spouse) or it can be divided by percentage among many
different people and entities (e.g., three children could each
get 30% and 10% could go to a charity).
The policy length: The time period that the insurer agrees to
pay a death benefit. This can be a specific term (e.g., 10 or 20
years) or it can be permanent – a policy that lasts for the life
of the insured for as long as premiums are paid.
The premium: The monthly or yearly payments needed to
keep the policy in effect.
FILLING UP AN APPLICATION FORM OF LIC POLICY
While taking a life insurance or health insurance policy (term plan, ULIP,
Endowment, Health Insurance), we are lazy to fill up the form ourselves. So,
agents take up the task of filling up the form and now the power is in their
hands. Some agents, whose whole focus is on their commissions, make sure that
no information is disclosed which can lead to policy application rejection or
increase in premium etc. just to make sure the policy is issued quickly (hassle
free). They will chose ‘NO’ in for all the questions like “are you a smoker?” -
NO, “Do you have any illness?” NO, and you don’t even bother to check it out.
You just put your signature as you are already in hurry to submit the documents
for tax claim in your office.
Claim Rejection due to wrong Information in Form
This is a serious issue and your claim will be rejected because the information
provided in the proposal form is wrong, because you never followed the
procedure to buy insurance properly. So make sure that you fill up the form
yourself or in worst case let your agent fill it up, but check each and every point
before submitting it to the insurance company or let your agent fill it one by one
and tell him what to fill at each place i.e. dictate your answers.
PREMIUM NOTICE
Insurance companies or agents notify a policyholder that a premium will be due
on a given date. Also referred to as a bill.
PROCEDURE FOR LAPSED POLICY
Can a Lapsed Life Insurance Policy be Reinstated?
It can be revived at any time within 5 years from the date of the first unpaid
premium. To revive a lapsed policy, you need to pay the accumulated unpaid
premiums along with the interest. Depending on the policy and the insurer, you
will be paying an 8-9% penalty on unpaid premiums for a plan that will yield 5-
6% returns.
How to Restore a Life insurance policy:-
The life insurance policy lapses if the premium payment is not made within the
grace period. In case the policy lapses, insurance companies provide a time
period to reinstate the policies. This time period can range from 15 days to 2
years and in some cases 5 years depending on the insurance company's risk-
taking capability.
If you are going for reinstatement then the insurance company may ask for
medicals and other requirements which were not asked at the time of policy
issuance. This is due to the age factor and the risk associated with it.
For restoring the lapsed policy, you need to visit the branch and submit an
application for reinstatement. Then the insurance company decides on the
premium to be paid to reinstate the policy along with the other
requirements to be satisfied such as medical tests etc.
Insurance companies sometimes charge interest and even levy penalties to
reinstate the lapsed life insurance policies. The greater the lapsed period of time
the higher would be the penalty.
In case of death of the policyholder when a policy has lapsed, if the policy
has achieved life insurance without surrender value, then claims will be
settled to that extent by the insurer. If not, the policy loses all its benefits
and no claims would be settled.
It is very important to note that once the life insurance policy lapses, you
no longer have coverage. This means that the life insurance company will
not pay the claim in the event of death. So sooner you reinstate the lapsed
policy, the better it would be for you.
PROCEDURE FOR SETTLING AN INSURANCE CLAIM
An insurance claim is a formal request by a policyholder to an insurance
company for coverage or compensation for a covered loss or policy event. The
insurance company validates the claim and, once approved, issues payment to
the insured or an approved interested party on behalf of the insured.
Life Insurance Claim Process
The main purpose of taking an insurance policy is that it should come in use in
the times of crises.
Selection of the right policy from a good life insurance company with a healthy
claim settlement ratio is the main requirement for buying a life insurance. The
main function of an insurance company is to ensure easy and timely settlement
of a valid claim in return for the premium paid by the insurer/ policy holder.
1. Death claim settlement process
Step One: Intimation to the insurance company about the Claim
The nominee should inform the insurance company as soon as possible to
enable the insurance company to start with the claim process. The details
required for intimation are policy number, name of the insured, date of death,
cause of death, place of death, name of the nominee etc. The claim intimation
form can be obtained from the nearest insurance company branch or even by
downloading it from the insurance company website. Alternatively, many
insurance companies also have online forms these days on their website for
claim intimation.
Step Two: Documents required
The nominee will be asked to furnish the following documents:
Death certificate
Age of the life insured (if not already given)
Original Policy document
Any other document as per requirement of the particular insurer or case
related
Step Three: Submission of required Documents for Claim Processing
For quicker claim processing, it is essential that the nominee submits complete
documentation as early as possible and any other documents that the company
needs to pass the claim.
Step Four: Settlement of Claim
As per the regulation 8 of the IRDAI (Policy holder’s Interest) Regulations,
2002, the insurer is obligated to settle a claim within 30 days of receipt of all
necessary documents including extra documents sought by the insurer. If the
claim requires further investigation, the insurer needs to complete its procedures
within 6 months from receiving the written intimation of claim.
2. Maturity & Survival Claims
The payment made by the insurance company on completion of term of policy
or maturity date is called maturity payment. The amount payable consists of
sum assured plus any bonus/incentives.
The insurance company informs the policy holder in advance by sending bank
discharge form for filling details in it. The form needs to be returned back to the
insurance company with original policy document, ID proof, Cancelled Cheque
and copy of pass book.
In many cases, life insurance claims have been delayed or denied due to lack of
proper documentation or simply because the proper claim process was not
followed. Hence, it is recommended that the claimant should be aware of the
claim process in order to have a hassle-free claim settlement process during the
emotionally draining time especially while filing a death claim.
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