Types of Term Insurance Claims You Should Know

Term insurance is one of the most straightforward and affordable forms of life insurance. It offers a pure life cover for a fixed term and provides a lump sum amount to the nominee in case of the policyholder's death. However, the process of claiming the death benefit can sometimes be unclear, especially if you're unfamiliar with the types of term insurance claims and how they work.

In this article, we’ll break down the different types of claims that you should be aware of when purchasing a term insurance policy, ensuring that you or your beneficiaries understand how to claim the benefits under various scenarios.

1. Death Claim (Most Common Claim)

The primary purpose of a term insurance policy is to provide financial protection to your family in case of your untimely death. Death claims are the most common type of claim in term insurance, and here's how it works:

Eligibility for a Death Claim:

• Policyholder's Death: The death claim is triggered when the policyholder passes away during the policy term.

• Nominee: The nominee (usually a spouse or child) or the legal heir can file a death claim with the insurer.

Documents Required:

• Death Certificate: A certified copy of the death certificate of the policyholder issued by the authorities.

• Claim Form: A filled-out death claim form provided by the insurer.

• Policy Document: A copy of the term insurance policy.

• Identity Proof of Nominee: The nominee's identity proof (Aadhaar card, passport, voter ID, etc.)

• Bank Details: Bank account details for the disbursement of the claim amount.

Important Points:

• If the death is due to natural causes, the insurer will usually settle the claim without complications.

• In case of accidental death, the claim process remains the same unless the policy includes an accidental death benefit rider.

• Suicide Clause: If the policyholder commits suicide within 12 months of taking the policy or reinstating it, the insurer may not pay the death benefit. However, if the policy has been in force for more than 12 months, the claim will be honored.

2. Critical Illness Rider Claim

Many term insurance policies offer critical illness riders as an add-on benefit. If you opt for this rider, you can receive a lump sum payout in case you're diagnosed with a critical illness like cancer, heart disease, or kidney failure.

Eligibility for a Critical Illness Claim:

• The policyholder must be diagnosed with a critical illness listed in the policy’s terms.

• The diagnosis must meet the medical requirements and criteria defined in the policy.

Documents Required:

• Medical Diagnosis Report: A certified medical report from a doctor confirming the diagnosis.

• Claim Form: A duly filled claim form.

• Medical Records: Hospitalization records, test results, and any other medical documents to support the claim.

Important Points:

• The critical illness rider provides a lump sum amount, which is generally paid out once the illness is diagnosed.

• The payout can be used for medical treatment or to cover any expenses during the recovery period.

• The rider is typically not linked to the policyholder’s death, meaning it’s an independent benefit.

3. Accidental Death Benefit Claim

If you have an accidental death benefit rider added to your term insurance policy, the nominee can file an accidental death claim if the policyholder dies due to an accident.

Eligibility for Accidental Death Claim:

• The death must occur due to a violent, unintentional accident.

• Accidental death must meet the criteria specified in the rider’s terms.

Documents Required:

• Accident Report: A police FIR (First Information Report) or accident report from the authorities.

• Death Certificate: Certified copy of the death certificate.

• Claim Form: Duly filled claim form from the insurer.

• Postmortem Report: In case of accidental death, the postmortem report might be needed.

Important Points:

• The accidental death benefit rider provides an additional amount of coverage on top of the standard sum assured.

• The death must be accidental and should not fall under any exclusions mentioned in the policy (e.g., death due to driving under the influence of alcohol).

• The claim payout will be provided to the nominee along with the regular death benefit if the claim is valid.

4. Terminal Illness Claim

Some term insurance policies come with a terminal illness rider that allows the policyholder to receive a portion of the sum assured if they are diagnosed with a terminal illness (a condition that leads to death within a short period, usually 6 to 12 months).

Eligibility for Terminal Illness Claim:

• The policyholder must be diagnosed with a terminal illness.

• The illness must be certified by an authorized medical practitioner.

• The policyholder is typically required to submit proof from two different doctors confirming the terminal illness.

Documents Required:

• Medical Certification: Certified medical reports from doctors verifying the terminal illness.

• Claim Form: Duly filled claim form.

• Policy Document: Copy of the term insurance policy.

Important Points:

• The policyholder can get a partial payout of the sum assured during their lifetime if they are diagnosed with a terminal illness, which can help cover medical expenses.

• The remaining amount will be paid out to the nominee after the death of the policyholder.

• If the policyholder survives beyond the expected time frame for the terminal illness, the benefit may not be applicable.

5. Maturity Benefit Claim (In Some Policies)

Some term insurance policies come with a return of premium (ROP) option, which means that the policyholder can get back the paid premiums at the end of the policy term, provided they survive the term.

Eligibility for Maturity Claim:

• The policyholder must survive the policy term to receive the maturity benefit.

• The policy must have a return of premium feature (this is not standard in all term plans).

Documents Required:

• Policy Document: Original policy document.

• Claim Form: Filled out maturity claim form.

• Identity Proof: The policyholder's identity proof.

Important Points:

• The maturity benefit will be the total premium paid during the policy term, minus any claims made for critical illness or accidental death.

• This benefit is more common in return of premium (ROP) plans.

6. Nominee Change/Update Claim

In some cases, you might need to update or change the nominee on your term insurance policy, especially if there's a change in the family structure (marriage, divorce, birth of a child, etc.).

Eligibility for Nominee Change Claim:

• The policyholder can request to change the nominee during the policy term by submitting a written request to the insurer.

• A change in nominee must be supported by legal documents in case of events like divorce, death of a previous nominee, etc.

Documents Required:

• Nominee Change Form: Form provided by the insurance company to change the nominee.

• Identity Proof: Proof of identity of the new nominee.

• Supporting Documents: Any supporting documents in case of divorce or death of the previous nominee.

Important Points:

• The updated nominee will be entitled to the death benefit in case of the policyholder's death.

• The policyholder can change the nominee as many times as needed during the policy term.

Conclusion

Understanding the various types of claims in term insurance is crucial for both the policyholder and the nominee. These claims can range from death claims to critical illness and accidental death benefits, depending on the policy features and riders selected. Always ensure that your family or beneficiaries are aware of the claim process and keep the necessary documents handy.

If you are the policyholder, make sure to review your policy terms and ensure that your beneficiaries are familiar with the process so that they can file the claim smoothly in case of any unfortunate event.

If you have any specific questions about claims or how to proceed in your case, feel free to ask!