Appoint two-three key people as life policy's nominees, say analysts

Not only should a life insurer settle a high percentage of the claims it receives, it should also be quick in doing so. The recently published Handbook on Indian Insurance Statistics for 2020-21 features data on duration-wise claim settlement. Buyers should look it up to see which insurers have been quicker in settling claims. However, for claims to be settled on time, policyholders and nominees, too, must fulfil their obligations.  

Fill proposal form carefully

To protect your nominees from hassles at the time of claim settlement, fill the proposal form correctly and completely.

“Don’t hide anything just because you may have to submit more documents or undergo fur­ther medical tests,” says Sajja Praveen Chowdary, business unit head-term life insurance, Policy­Bazaar. Some details are crucial.

“Information related to income, ownership of other life policies, and health must be disclosed truthfully,” says Abhishek Misra, chief executive officer and principal officer, Bonanza Insurance. He adds that policyholders should fill the proposal form themselves, or review it after it has been filled by an agent.

Keep family members in the loop

After purchasing a policy, inform the nominee and other key family members.

“In India, family members are often not aware of all the policies purchased by the breadwinner,” says Naval Goel, founder and CEO, PolicyX.com.

Update nominee details

Sometimes the nominee changes, but the policyholder fails to inform the insurer. For instance, the policyholder’s wife may have been the nominee, but she passes away. The policyholder fails to update the insurer that his child is now the nominee. “If the change was not made prior to the insured’s death, the insurer will ask for additional documents, like a succession certificate, to ensure that money is paid to the rightful legal heir,” says Atri Chakraborty, chief operating officer, IndiaFirst Life Insurance.

If a nominee’s details – address, bank details, etc – change, update that information also at the earliest with the insurer.

Policy age matters

According to Section 45 of the Insurance Laws (Amendment) Act, 2015, no claim can be repudiated after the policy has been in force for three years. “The policy becomes incontestable. Payouts happen faster in such policies,” says Chakraborty. If a claim is raised within three years, the insurer can repudiate the claim on the ground of misrepresentation or suppression of material facts. “In such cases, the claim process can become lengthy as the insurer at times gets into a detailed investigation,” says Goel.

Provide complete documentation

Claim settlement gets delayed if the nominee submits incomplete documentation. The key documents that need to be provided are the original policy, death certificate, know-your-customer documents, copy of cancelled cheque and bank statement, and filled claim form. In cases where the insurer wants to investigate more, it can ask for the hospital discharge summary and case-related papers. In case of an accidental death, insurers usually ask for the first information report and the post-mortem report.

Select nominee carefully

During the Covid-19 pandemic, there were many cases of husband and wife passing away within a short span. The heirs had to run around to obtain a succession certificate. In non-life policies, the nominee can receive the money, but holds it in trust for the heirs.

“In life insurance, the concept of a beneficial nominee was introduced through the amendment of 2015. Immediate family members, like parents, spouse, and children, can be appointed beneficial nominees,” says Yashojit Mitra, partner, Economic Laws Practice.

When the proceeds go to a beneficial nominee, he/she doesn’t have to share it with the other legal heirs.

To save heirs the hassle of obtaining a succession certificate, Mitra suggests that policyholders appoint two or three key persons in their lives as beneficial nominees. The percentage of sum assured that should go to each can also be specified.

Finally, after the policyholder’s demise, nominees should ideally lodge the claim within a fortnight.

“In case of a delay, keep the insurer informed,” says Chowdary.