How Much Time Does A Life Insurance Policy Take To Settle The Death Claim

Time a Life Insurance Policy Takes to Settle a Death Claim?

The choice of a life insurance policy from an insurance provider with a high claim settlement ratio (CSR) is crucial for you as the policy customer.

Written by : Nitin Bhatia

Reviewed by : Gaurav Nagpal

Gaurav Nagpal

2020-10-15

1375 Views

8 minutes read

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As a beneficiary or nominee of a life insurance policy, you must know how much time it will take to settle the death claim. Although there is no time limit for a beneficiary to claim a life insurance policy, it is better to avoid any delay. In some cases, the beneficiaries aren’t even aware that they are nominees of a life insurance policy. . What if years have passed since the death of the policyholder and no death insurance claim has been made? Will the beneficiary get the death benefits as promised to the policyholder? The answer is yes.

Although there is no time limit for a beneficiary to make a death claim, there is a time limit that a life insurance company adheres to when a death claim is made.

Let us understand this with an example:

Avijit, a transport business owner, had bought a life insurance policy in the early 90s. His family had to file a death insurance claim on the policy in 2015 when he met with an unfortunate and fatal accident.

His son, Rajendra, was 20 years old then and recalls what a difficult time they had to face. The whole process ultimately took more than a month. The claim amount was nonetheless very useful for the family in sustaining their livelihood and business.

Rajendra also bought a life insurance a few years later, once he started to run the business. While researching a suitable plan, he realised things had changed a lot since his father’s days. Now, he could buy the best life insurance policy online. Not only that, Rajendra now has the option of a claim guarantee with online life insurance plans, especially term insurance. Life insurance plans with a claim guarantee promise to settle the death claim within a short period.

Table of Content

Legal Limit & Conditions of Death Claim

As per the time limits set by the Insurance Regulatory and Development Authority (IRDA) of India, insurers should get a death claim settlement within 30 days. This condition applies to all claims where the insurer does not see the need to investigate the cause of death.

The 30-day count starts once the family submits all the relevant documents related to the death claim. In the case of investigation in the claim, this limit extends to 90 days.

If the insurer cannot settle the claim within this time limit, they will pay interest on the claim amount for the delay.

Factors Affecting the Timing of Life Insurance Claim Payout

Providing accurate information, submitting complete documentation, and maintaining an active policy are crucial to ensuring a timely life insurance claim payout. The type of claim and the insurer's claim settlement practices can also impact the timing.

The key factors that can affect the timing of a life insurance claim payout are:

  • Incorrect or Incomplete Declarations in the Proposal Form: If the insured person provided inaccurate or incomplete information in the policy application, the insurance company may need to conduct further investigations, which can delay the claim payout.
  • Documentation Issues at the Time of Claim Submission: Ensuring all required documents are submitted correctly and on time is crucial for a smooth and timely claim settlement. Missing or incomplete documents can cause delays.
  • Exclusions in the Policy: If the cause of death is found to be excluded under the policy terms, the claim may be rejected, leading to delays in the payout.
  • Timely Renewal of the Policy: It is important to keep the policy active by paying premiums on time, as a lapsed policy may result in the claim being denied.
  • Type of Claim: Death claims that occur soon after the policy is issued (within 2-3 years) may require additional investigation by the insurance company, which can extend the claim settlement time.
  • Verification Process: The insurance company has to verify the legitimacy of the claim, which can take 30 days or longer depending on the complexity of the case.
  • Insurer's Claim Settlement Practices: Some insurers are more efficient than others in processing and settling claims within the mandated 30-day timeline.

Claim Guarantee in Online Life Insurance Policies

While the regulator has put the conditions for timely claim settlement, a claim guarantee ensures a voluntary claim assurance from the insurer. Claim guarantee applies to life policies that meet the criteria set up by the insurer.

The death claim settlement time limit has come down from 30 days to 24 hours due to the claim guarantee. While 24 hours is desirable for all the policies, at times, the claim may take additional time. For such cases, the maximum time to settle goes up to five working days, especially if the claim amount is large.

For example, if the death claim is within Rs. 1 crore, insurers can settle it within 24 hours. Death claims of more than Rs. 1 crore may take a little longer, but in any case, they would be settled within five working days.

You should note that the clock starts ticking only after the insurer receives all the relevant documents for the claim.

Use of E-Insurance Accounts

E-insurance account or Electronic Insurance account is another leap towards total digitisation of the insurance process. An E-insurance account acts for insurance policies just like a d-mat account works for stocks and mutual fund holdings.

You can add all your life insurance policies to your e-insurance account and use them to manage them all from one place. An E-insurance account eliminates the need for paperwork related to policy management.

You also need to assign an authorised representative for your e-insurance account. The authorised representative will be liable to operate your e-insurance account and close it in the case of your demise.

While authorised representatives may access the policy details of the account owner, the policy benefits still go to the nominees only.

Wrapping Up

Timely death claim settlement is a critical aspect of life insurance, as it provides much-needed financial support to the policyholder's loved ones during a difficult time. Insurance companies in India are required to adhere to strict guidelines set by the regulatory body, IRDAI, which mandate the settlement of death claims within 30 days in cases where no investigation is required. However, claims that require further investigation can take up to 90 days to settle.

Some insurers also offer "claim guarantee" features, which promise to settle death claims within 24 hours for smaller amounts or within five working days for larger claims. This demonstrates the industry's efforts to improve the claim settlement process and provide a hassle-free experience for policyholders' beneficiaries. Ultimately, the death claim process length depends on factors such as the accuracy of information provided, the cause of death, and the insurer's internal processes. By understanding these factors, policyholders can ensure their loved ones receive the promised benefits in a timely manner.

Glossary:

  • Authorised Representative: A person assigned to manage the policyholder's e-insurance account in case of its demise.
  • Underwriting: The process insurers use to assess the risk of insuring a policyholder.
  • Claim Escalation: Raising a concern or issue to a higher authority within the insurance company if there is a delay or problem with the claim.
  • Claim Assurance: Confidence provided by the insurer regarding the timely and fair settlement of death claims.
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FAQs Related to Death Claim Settlement

Death claim settlement typically takes less than 30 days. It may, however, take longer if further research is needed to substantiate a claim. The deadline for filing death claims is 120 days after the date of death.

A few factors that affect the settlement time of a life insurance death claim are the submission of documents, the type of claim, and misrepresentation of information.

The documents required in a life insurance death claim process are:

  • Completed claim form (provided by the insurance company)
  • Death Certificate 
  • Policy document
  • Deeds of assignments/ re-assignments (if any)
  • Legal evidence of title if the policy is not assigned or nominated.
  • Form of discharge executed and witnessed.

Notifying the insurance company as soon as possible following the insured's passing is one of the first measures towards a prompt claim payout. There's not enough time to waste, and not telling the insurer right once can cause problems.

The beneficiary's status, the reason for death, and errors in the paperwork can all delay the payout. Sometimes, life insurance companies want additional documentation before making a payout.

If your life insurance death claim is taking too long to settle, you should contact the insurance company directly and inquire about the status of your claim. Provide them with all the necessary documents they have requested, such as the death certificate, policy details, and your identification. If the delay persists beyond the 30-day regulatory timeline, politely escalate the issue to the insurer's grievance redressal department and request an explanation for the delay.

You can follow the steps given below to check the status of your life insurance death claim:

Step 1: Go to your health insurance company's official website.

Step 2: Select 'Claims' from the health insurance page.

Step 3: Input your policy information and, if available, the claim application number.

Step 3: You will see the status of your claim.