Life Insurance Claim Settlement Process – Why claims get rejected and All You Should Know

Life Insurance Claim Settlement

The very purpose of a life insurance policy is to secure the breadwinner’s life and his family’s future. Life insurance gives cash benefits to the policyholder during his critical life milestones such as child’s higher education and marriage, health care emergencies and retirement or after the event of his unfortunate death. The benefit(s) received from the purchase of a life insurance policy in return of the premiums paid is called a claim. There are three types of life insurance claims:

1. Death Claim
2. Maturity Claim
3. Rider Claim

This article is divided into five sections to help you understand claims and settlement process.

Section 1: Reasons for claim rejection
Section 2: Understanding claim settlement ratio
Section 3: Claim settlement process – death, maturity and riders
Section 4: Online claim settlement – is it available?
Section 5: Claim settlement promises of insurance companies
Section 6: FAQs


Just imagine if the insurance company refuses to pay either of the above claims! It could be a nightmare for you and / or your family.

You have waited your lifetime to get principal amount plus bonus of the insurance policy, but you don’t receive it. You are critically ill and waiting for amount due on the critical illness rider, but the insurance company refuses to pay. Your family wants to claim the death benefit after your sad demise, but the insurance company denies it.

Should You Always Blame the Insurance Company?

As per the insurance contract, insurance companies are under an obligation to pay the claims. But, then there are certain terms and conditions attached to this payment, which, if overlooked at the time of taking the policy, could prove a fatal mistake during the claim settlement process. While maturity and rider claims are comparatively less hassle-free to receive and chances of rejection are very low, it is the possibility of death claim denials which worries a potential insurance buyer the most.

However, statistics (IRDA June 2015 Journal) reveal that death claim settlement ratio of private sector is hovering around average 89% for the last 3 years, while for that public sector (comprising only LIC) has been consistently more than 95%. This means that out of every 100 death claims made in the last 3 years, private insurers have rejected only 11 cases while LIC has rejected between 1-5 cases.

Hence, it would be incorrect to say that insurance companies do not pay claims. They mostly do, but it is also equally important to know why they don’t do in some cases.

So, Why Claims are Rejected?

A large number of rejected claims are a result of either deliberate or unintentional slip ups on the part of the policy holder. Let’s see a few such reasons of claim rejection.

1. Not furnishing correct information about your age, income, occupation and number of dependents.
2. Not revealing the facts about your medical condition such as any prior diseases or family health history.
3. Not disclosing your lifestyle habits such as smoking or drinking, if you have one. Or, even if you do disclose, you may not be completely honest about the number of cigarettes you smoke or the quantity / frequency of alcohol consumption.
4. Not nominating the beneficiary or not furnishing the correct nominee details could also result in claim rejection.
5. Not paying premiums by due date or within grace period could lead to policy lapse. A claim on a lapsed policy is not valid.
6. Not declaring your previous policy details, if any.

It is advisable to be completely honest about the material facts and also understand all terms and conditions at the time of buying a policy.

You should also verify your personal information filled in the proposal form, especially if done so by an advisor, so that you can eliminate any errors.

After you receive the policy document, you must check that all your details are in order and the terms and conditions mentioned therein are satisfactory. If you find even a single spelling mistake in your name or incorrect mention of any other material fact, you should immediately notify the insurance company to rectify.

Early Death Claim Rejection
An insurance company might also reject an early death claim – that is, the policyholder dies within 3 years of taking the policy. This could be suicide, murder or a fraudulent death. Depending on case to case, the insurance companies undertake a detailed investigation, if they suspect a fraud, especially on discovering the material misrepresentation of the facts.

The Good News
The recent amendment in Section 45 of the Insurance Act 1938 seeks to reduce litigation over claims. According to this amendment, any policyholder can now be sure of payment of claims amount to his heir in case of his unfortunate demise if his life insurance policy has completed three years since inception or revival. The insurers, on the other hand, will have to upgrade their underwriting standards and skills to protect themselves against potential fraud.

The amendment also states that in case of fraud, the insurer must write to the claimant the basis of their considering the proposal or the claim as an attempt to defraud the company. The onus is now on the policyholders or the beneficiaries to prove that the misstatement or suppression of a fact was not done deliberately.

So, both the insured and insurer has to play their part honestly and carefully.


Claim settlement ratio refers to the total number of death claims settled by an insurance company. This calculation is done by dividing the total number of death claims received by the total number of death claims settled. For example, if an insurance company receives 1000 death claims and settles 950, the claim settlement ratio of that company would be 95%. The higher the claim settlement ratio of the company, the better it is for the insurance buyers. It indicates that in the event of the unfortunate death of the policyholder, the probability of the nominee getting the sum assured is higher.

A claim settlement ratio of 95% and above should be ideally taken as a benchmark while comparing insurance plans from different companies. Check here to see current and historical claim settlement ratio of insurers




It is advisable that the claimant registers the claim at the earliest or at least during the claim intimation time (usually 60 to 90 days from the date of the death of the policyholder) as specified by the insurance company. The claimant can also take help of the insurance advisor who sold the policy to the policyholder.

The claim settlement process may slightly vary from one company to another. Here is how the claim settlement process usually works.

1. Intimate the claim: The claimant should contact the insurance company via email, phone, website or branch visit to give the claim intimation and understand the claim settlement formalities. The claimant is required to fill and submit the claim intimation form provided by the insurance company. This form typically contains the basic details like the policyholder name, claimant name, nominee details, policy number as well as date, reason and place of death.

Sample: Death Claim Application Form of Max Life Insurance





2. Submit the documents: The claimant would be required to submit the following mandatory documents to the insurance company.

• Claim form
• A copy of death certificate (never submit the original death certificate, you may require it later for other purposes)
• Original policy document
• Nominee’s photo identity and address proof

Apart from the above documents, the insurance company may ask for the following supporting documents, depending on the nature of the death of the policyholder and type of the case.

• Assignment / Re-assignment deed
• Legal evidence of title, in case the policy is not assigned or nominated
• Medical records at the time of death & past illnesses
• FIR, Police inquest report & panchanama
• Post mortem report
• Certificate from employer, hospital or any other authority as applicable.
• Any other document, as deemed necessary.

3. Settle the claim: The quicker and more precisely the claimant completes the formalities, faster the claim settlement process would be. As per the IRDA guidelines, it is mandatory for the insurance company to settle the claim within 30 days of the receipt of necessary documents and clarifications sought. If the insurance company feels the need for further investigation, it may do so. However, it is still obliged to settle the claim within 6 months from the date of claim intimation.

4. Payout: The claimant will receive the payout after the insurance company approves the claim. Please note as per an IRDA circular, the insurance payouts can be made only through electronic mode. In case the insurance company rejects the claim, communication regarding the same is sent to the claimant.


The payment by the life insurance company to the insured on the date of maturity term is called maturity payment which includes a sum assured and bonus/incentives, if any. The insurance company intimates the maturity date and amount to the policyholder through a blank discharge voucher, about 2-3 months in advance.

The policyholder has to furnish the information mentioned in the discharge voucher, sign it and submit it along with the original policy document to the insurance company. If the policyholder has assigned or reassigned the policy, then the relevant deed has to be submitted too.

Sample: Maturity Claim Discharge Voucher of SBI Life Insurance



The rider claim settlement process depends on the type of the rider taken. At times, the settlement for riders like accidental death or premium waiver runs parallel with the death claim.

Documents Required

1. Critical Illness Rider
• Original policy document
• Claim form
• Hospital admission records
• Medical reports
• Discharge summary
• Any other as required by the insurance company

2. Accidental Disability Rider
• Original policy document
• Claim form
• Attested copy of FIR
• Medical records such as medicine bills and test reports
• Certificate of disability from doctor
• Photograph of the injured with reflecting disablement

3. Hospital Cash Rider
• Original policy document
• Claim form
• Medical records such as medicine bills, test reports and doctor’s prescription
• Hospital Discharge Card



The communication between the claimant and the insurance company regarding intimation to payout / denial will mostly happen through emails, phones or / and letters. The claimant will require to pay a personal visit to the nearest branch of the insurance company at least once.

Whether the policy holder has purchased the policy online or offline, most insurance companies provide the online claim settlement facility with respect to following aspects only:

1. Claim Intimation – The claimant can visit the website of the insurance company and fill up an online form to intimate the claim. For submission of documents and further procedure, the claimant has to visit the nearest branch of the insurance company.

2. Claim Forms – The claimant can download the claim intimation form as well as various other claim related forms from the website of the insurance company. The duly filled forms can be submitted at the nearest branch of the insurance company for further procedure.

ICICI Prudential even has a facility to allow the claimant to upload the documents on its website.

3. Payout – If the claim request is approved, the claim payout will be directly credited to the claimant’s bank account


We visited the official websites of a few insurance companies to understand what they have to say about their death claim settlement process.

1. Max Life Insurance

• Fast settlement
“We will pay all death claims within 10 working days of receipt of all claim documents/ information. We shall pay interest @ 6% p.a. for any delays.”
• Claim assurance
“We ensure payment of all death claims for policies having completed 3 continuous years.”
• Advance account value payout
“We will pay fund value of all Unit Linked policies within two working days of claim Intimation.”
• Personalized assistance
We assign a dedicated Claims Relationship Officer for all death claims

2. LIC

Concessions for claims during the lapsed period

1. If the policyholder has paid premiums for atleast 3 full years and subsequently discontinued paying premiums, and in the event of death of the life assured within six months from the due date of the first unpaid premium, the policy money will be paid in full after deduction of the unpaid premiums, with interest upto date of the death.

2. If the policyholder has paid premiums for atleast 5 full years and subsequently discontinued paying premiums and in the event of death of the life assured within 12 months from the due date of first unpaid premium, the policy money will be paid in full after deducting the unpaid premiums, with interest upto date of the death.



1. Who is legally entitled to receive the death claim benefit?
The death claim is payable to the nominee of the deceased policy holder as mentioned in the policy document.

2. Who is legally entitled to receive the death claim benefit in case there is no nomination in the policy document?
It may be possible that the policy holder made the nomination, but the policy document is not updated with this information. Hence, it is advisable to contact the insurance company to confirm if the nomination details are missing or available in their records.

If there is no mention of the nomination or benefactor of the policy, then the claim is payable to the person who holds a Certificate of Succession or a legal evidence of title from a law court.

3. Whom can the claimant contact if he has any complaints regarding claims?
If there are any grievances such as a claim dispute or a delay in the settlement process, the claimant should approach the Grievance or Customer Complaints Cell of the insurance company. If the claimant does not get a satisfactory response to his grievance from the insurance company, he can approach the IRDA Grievance Cell and thereafter, Insurance Ombudsman if the grievance still remains unaddressed.

4. How to know the status of a claim?
The claimant will get a Claim ID, a kind of reference number against the claim submitted. The claimant can call up the customer care, visit the branch or check the status online using this Claim ID.

5. What if the claimant does not have a Claim ID?
Usually, every insurance company provides a Claim ID. The claimant must take note of this Claim ID. In case the Claim ID is lost, then the claimant can get a status update based on the policy number.

A life insurance claim if repudiated can be alarmingly disturbing the policyholder and / or his family. In order to ensure a hassle-free claim settlement process, it is in the best interest of the insurance buyer to be honest about his disclosures while taking a policy. Also, it is of the utmost importance the policyholder makes the nominee aware of his life insurance policy and also gives a fair idea of handling the claim settlement process.

The claim settlement process should not be a cause of worry, as long as these precautions are taken care of.

So go ahead and find the right term plan for your family by clicking here. Read all the data about insurers before taking the final decision. At the same time don’t delay this decision.

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