Claim Settlement Process & Documentation

Who claims and how

Claim settlement is the process by which the insurer examines a death claim and pays the benefit to the nominee or other claimant. Nomination is governed by section 39 of the Insurance Act, 1938; where the nominee is a parent, spouse or child of a policyholder insured on their own life, that person is a beneficial nominee.

The process starts with intimation, meaning the claimant informs the insurer of the death. The insurer's claim checklist lists the papers it needs, such as the claim form, the death certificate and proof of the claimant's identity and bank account.

The time limits

The rules are in the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024 and the Master Circular of 5 September 2024, which replaced the 2017 regulations. A death claim that needs no investigation must be settled within 15 days of intimation. Where investigation is needed, it must be investigated and settled within 45 days of intimation.

Older material quotes 30 days from receipt of all documents, and 90 days for completing an investigation; those were the 2017 figures. An insurer that pays late owes interest at bank rate plus 2%, on its own, without the claimant having to ask. The interest runs from the date the claim was intimated until the date of payment.

When a policy can be contested

Section 45 of the Insurance Act, 1938 sets the outer limit. No life policy can be called in question on any ground after three years from the latest of the date of issue, commencement of risk, revival or a rider. The period was two years before the 2015 amendment.

Within the three years the insurer may contest the policy only for fraud or for a material misstatement or suppression, and must give its grounds in writing. On materiality, the insurer has to show that it would not have issued the policy had it known the fact. Where a policy is repudiated for misstatement that is not fraud, the premiums paid have to be refunded within 90 days.

When less than the sum assured is paid

A lapsed policy carries no cover, so a death after lapse is not payable. Cover continues during the grace period, so a death within it is still covered; the policy lapses only if the premium is still unpaid when the grace period ends. Suicide is treated separately under the Master Circular on Life Insurance Products of 12 June 2024, not under section 45: for death by suicide within 12 months of the start of risk or of a revival, the nominee of a non-linked policy gets at least 80% of the premiums paid or the surrender value, whichever is higher, not the sum assured.

Where the death happened is not a ground for refusal. A death in a different city from where the policy was bought is assessed like any other.

Rules at a glance

Key points

• A death claim needing no investigation must be settled within 15 days of intimation; with investigation, within 45 days.
• Late payment carries interest at bank rate plus 2%, from the date of intimation to the date of payment.
• After three years a life policy cannot be called in question on any ground under section 45.
• Within three years the insurer can contest only for fraud or material misstatement, with written grounds.
• For a non-linked policy, suicide within 12 months of risk start or revival brings at least 80% of premiums paid or the surrender value, whichever is higher, not the sum assured.

Common misunderstandings

• Thirty days is not the current limit: a death claim is to be settled within 15 days of intimation, or 45 days if investigated.
• Section 45 does not contain the suicide rule: that sits in IRDAI's Master Circular on Life Insurance Products.
• The place of death is not a ground for refusing a claim.

Questions people ask