Learn about the various types of term insurance claims, including death, accidental, and terminal illness claims, and their requirements
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Term Insurance (TI) is an affordable and easy way to secure your family's financial future. With term plan, you get pure life coverage without the bells and whistles. You can choose convenient blocks of years, known as terms, to suit your family's lifestyle. Generally, you can buy Term Insurance policies in increments of 10, 20, and 30 years, although these terms vary by insurance company.
When you buy a Term Insurance policy, you can always renew it before it expires, or choose to migrate to a Whole Life Insurance policy instead. You or your family can claim the sum assured of the policy depending on whether it's a death benefit, maturity benefit, or a type of rider. In this article, you'll learn about different types of Term Insurance claims.
A Term Insurance claim is a request made to the insurance company to initiate the applicable payout based on the policy’s terms and conditions. Usually, the nominee or beneficiary you list in your Term Insurance policy is the person who can make such a request to claim your policy's value. Your insurance company will have to pay your nominee the amount mentioned in your policy. This amount is known as the sum assured, and your nominee can claim it. As long as all the information in your policy is correct, and your beneficiary provides the requested documents, your insurance company will pay them the applicable benefit.
Primarily, there are three types of Term Insurance claims. Here’s a list.
If you pass away while your policy is active, your beneficiaries can request a death claim. In the death benefit claim, your insurance company will pay your beneficiaries, as long as all their particulars and documents match with your policy details.
A rider is an add-on benefit that you can purchase for your Term Insurance plan. Usually, riders can maximise the benefits and coverage of your plan. The following riders offer you or your nominees a payout when you or they claim it.
Accidental Death Benefit claim: In some kinds of term plan, your insurance company may have an extra death benefit known as the Accidental Death Benefit. Here, your beneficiaries are entitled to an extra compensation if you unexpectedly pass away because of an accident.
Critical Illness claim: If you purchased a Critical Illness rider, you're entitled to coverage if you get a long term illness. Usually, your insurance company will list out illnesses they cover and if you're diagnosed with any of them, you or your beneficiaries will get a lump sum payment.
Disability claim: A disability rider offers you coverage in the rare event that you become disabled and cannot work anymore. If this happens, then you or your beneficiaries will get a regular payout to cover your expenses.
This is not a common type of claim as maturity benefits are not usually associated with TI policies. They can come in the picture if you have a Return of Premium rider. Unlike most of the other Term Insurance claims, a maturity benefit claim is the amount you receive when you outlive your policy. You get a sum assured when your policy matures, or expires. To claim your policy on time, apply at least a month or two before your policy expires.
You or your nominees will need to raise a Term Insurance claim request to receive the payout from the insurance company. Although the claim processes vary from one insurance company to another, the following steps are usually standard.
Except for the maturity, illness, and disability claim, your beneficiary will need to request a claim on your policy after you pass away. They will need to submit the relevant documents along with your death certificate. Generally, insurance companies ask for this process to be initiated within 3 months of your passing.
Your insurance company will review the Term Insurance claim against your details so that the correct people get your sum assured. Usually, insurance companies will hire an assessor to evaluate claims against policies.
If the assessor accepts your beneficiary's claim, then the sum assured will be paid out to them. Generally, the amount is paid to the beneficiary's bank account. However, if the Term Insurance claim is rejected, the beneficiary will be notified with the reason for rejection and further documentation if any.
Here are common reasons why a Term Insurance claim can be rejected.
False information doesn't just affect your premiums, but also affects claims. If you provide your insurance company with falsified data or information, then your beneficiaries will have a hard time raising a claim. Also, if your beneficiaries submit inaccurate or misleading information, their claims will be rejected. Make sure to share honest and accurate information about your age, health status, lifestyle habits, job, and other criteria.
Missing your premium payments or frequently paying them late can increase the chances of your claims getting rejected. Late payments and missed payments can result in lapsed or terminated policies. If your family doesn't know that your policy was terminated, they may be claiming against a policy with no value.
In case you miss a payment or two, you can make use of the grace period that most insurance companies offer. Generally, a grace payment period is around 15 days, but the duration depends upon individual insurance companies.
All life insurance policies depend on your health and medical history in order to determine your premiums and payouts. If you hide or withhold important medical information, your beneficiaries will suffer due to claim rejection. Withholding medical history from your Insurance company can bar your beneficiaries from receiving your sum assured.
Your nominee or beneficiary is the person that you list on your policy, and in case you pass away, your sum assured goes to them. If you do not appoint a nominee when you buy your policy, there can be legal hurdles for your beneficiaries after you're gone.
A Term Insurance claim commonly takes place when your nominee raises a request so they can claim your policy's sum assured. When the claim is accepted and goes through, your insurance company will pay your nominee the sum assured from your policy.
There are 3 main categories of Term Insurance Claims, which are maturity benefit claim, death benefit claim, and rider benefit claim.
Except for some rider claims, and maturity claims, all other claims are usually from the death benefit claim. To claim a death benefit on policy, you (as a beneficiary) need to submit the policyholder's death certificate, and establish your relation to them and prove that you are the nominee. If the insurance company accepts your claim, you will be paid out usually to your bank account.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.