A Guide To Claiming Life Insurance

The article explains in detail the kinds of maturity benefits that may be claimed from the insurance company in case a policy has matured or the policy owner has expired before the maturity date

Nowadays people are well aware about the fact that life insurance is a crucial component of their financial planning. A majority of people possess life insurance in order to secure their dependents and family in case of the unfortunate demise of a policyholder. Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. This insurance comes as a breather in difficult times. Whenever anyone purchases a life insurance policy, he or she would always want to know how much money would be due to him and when.

That is precisely the aim behind purchasing a policy. Presently, life insurance companies being empathetic are creating hassle-free processes for the deceased’s family as they face emotional breakdown due to sudden demise. Insurance companies have an obligation to settle claims promptly as it is one of the significant services that an insurance company can provide to its customers. The insurance contract is valid for payment of the insured amount during the date of maturity or specified dates at periodic intervals or in case of unfortunate demise if it occurs during the policy term.

Life insurance is universally acknowledged to be an institution which eliminates ‘risk’, substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. Life insurance, in short, is concerned with two hazards that stand across the life path of every person:

• That of dying prematurely, leaving a dependent family to paddle their own canoe 
• That of living till old age without visible means of support.

Let’s discuss some of the benefits which come along with the insurance policies. Life insurance companies distribute a part of the surplus ‘with profit’ to the policyholders in the form of bonus. Insurance companies invest a huge proportion of premiums collected from policyholders in government-secured debt instruments and a minor proportion in equities. And based on earnings from the investments and claim experience, the company distributes a part of the surplus ‘with-profit’ to the policyholders, often known as a participating policy, in the form of bonus. The rate of bonus is determined after taking into account several factors like return on investments, level of bonus announced in the preceding years and other actuarial assumptions.

1. Simple Reversionary Bonus: Such bonus is declared as a percentage rate, applied to the sum assured in respect of the basic policy benefit. Under this type of bonus, the calculation is done on the basis of simple interest. At the end of each policy year, an annual bonus is declared and it is accumulated to be paid at the time of claim or at maturity. The interest of the bonus which has been accrued does not earn cumulative interest and only the principal amount is considered in the interest calculation.
2. Compound Reversionary Bonus: The calculation is done on the basis of compound interest i.e. the bonus is computed as a percentage on the sum assured and on all preceding accumulated bonuses.
3. Interim Bonus: Interim bonus is payable for those policies that mature as a result of a death claim in between two bonus declaration dates. While the policy has already accrued the bonus declared at the end of the last financial year, there may be a short period in between the bonus declaration date and the maturity or claim date for which the policy has not received bonus. In such cases, a bonus is added on a pro-rata basis using the interim bonus rates declared by the company.
4. Cash Bonus: This provides the policyholder an opportunity to receive the bonus year on year rather than the usual way of accruing till bonus maturity. The insurance company may decide to give the bonus in cash, i.e. bonus accruing in a year is paid to the policyholder at the end of the year.

The most common types of claims are maturity claim and death claim:

1. Maturity Claim: At maturity, the insured gets the sum assured, vested bonus and loyalty additions, if any. Maturity claim is associated with the maturity benefit of the policy. It means that when the policy completes its tenure, a certain amount of money, called maturity claim amount, is settled towards the life assured. It is paid only if the policy completes its due course of time and the policy has been continued properly, i.e. all due premiums have been paid on time. Maturity Value = Sum Assured + [(Sum Assured*Bonus per 1,000*Term of Policy)/1000]

2. Death Claim: The primary feature of a life insurance policy is the death benefit it provides. Permanent policies provide a death benefit that is guaranteed for the life of the insured, provided the premiums have been paid and the policy has not been surrendered. The death claim amount is payable in case of policies where premiums are paid up to date or where the death occurs within the days of grace. Payment from the policy may be lump sum or as an annuity, which is paid in regular instalments for either a specified period or for the beneficiary’s lifetime.

Surrender Value

If in case any policyholder is not willing to continue his or her insurance policy during the policy term then he or she has the option of surrendering the policy. When the policyholder surrenders a policy before the maturity period for its cash value, life insurance protection ceases and the insurer has no further obligation under the policy. When an insured surrenders the policy before maturity, he or she does not get 100 per cent of paid-up value but a percentage as mentioned in the policy. What is the disadvantage of exiting the policy before maturity? Once you exit the insurance policy, all the benefits associated with it including protection cover will cease to exist. Therefore, ideally, you should consider terminating the policy only if you believe that you have been sold a policy that does not fulfil your requirements, or the features prove to be different from what was promised to you.

Proceeding with the Claim

When a family faces any sudden or unfortunate demise of their loved one who is the sole breadwinner of the family then they may be in need of immediate cash in order to pay off any hospital bills or follow any proceedings related to death. So, in this case, beneficiaries need to know how to collect life insurance payments they are entitled to as proceeds from life insurance policies provide quick income for surviving family members. It is common for the policy beneficiary to deal with the insurance company directly, get the claim process started as soon as possible and collect benefits. For the same reason one must have answers to the following questions:

•  What type of life insurance policy or policies did the deceased have? 
•  Were the policies still in force at the time of death?
•  What benefits they will be entitled to?
•  Who are the beneficiaries?
•  How much claim will the beneficiaries receive?

To claim life insurance benefits, the beneficiary should contact the insurance company’s local agent, office or check the company’s website. Subsequently, a claim form needs to be submitted with detailed information. One should not leave out any details while filling out the claim form. This can lead to outright rejection of your claim. The companies ask beneficiaries for the following requirements: claimant’s statement giving details of the deceased, death certificate, ID proof of the beneficiary, insurance policy papers, discharge form (if any), post-mortem report (if death is due to any unnatural cause).

In some cases, insurance companies seek for additional information in case of suspicious death or a large policy amount. This additional information is required in order to verify the genuineness of the claim. Further, if more than one adult beneficiary was named, each should submit a claim form. If the insured’s death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it has an obligation to pay the claim.

Conclusion

To conclude, while making claim one should be aware of various components discussed in the above article as it might help you in receiving the right amount of claim with all the benefits. Before claiming insurance the beneficiary should go through the policy document of the deceased so that he does not miss out on any information and ends up with a rejection of the claim from the insurance company.