Death Claims on Non-Paid Premium Policies
In Life Insurance, policyholders often wonder whether their Death Claim will be accepted or not. In reality, one of the primary reasons for Death Claim Rejection is non-payment of policy premium on time.
In this article by Jeevan Bima Bazaar, we will explain when and how a death claim can be accepted based on premium payments, and in what situations it may be rejected. In many cases, policyholders assume that a death claim will not be paid if the premium remains unpaid. However, under certain circumstances—such as after the grace period has expired—a death claim may still be payable.
This article provides detailed insights into these crucial aspects. The information here is based on the rules of the Life Insurance Corporation of India (LIC). If your policy is with another life insurance company and your claim is denied, you may be able to appeal in court using similar grounds.
First Check in Death Claim Process
When a death claim is filed for a life insurance policy, the first step is to check the policy’s FUP (First Unpaid Premium). To do this, examine the last premium receipt paid by the policyholder. If the FUP date on the last premium receipt falls after the policyholder's date of death, it indicates that all premiums for this policy have been paid in full, making it eligible for a death claim.
In LIC Premium Receipts, the FUP is shown as the Next Premium Due Date. If the policyholder has multiple life insurance policies, you should check the next premium due date (FUP) in the last premium receipt of each policy to confirm which policies are active.
What to Do in the Absence of the Final Receipt
If the Premium Receipt for a policy is unavailable, you can find the FUP by visiting the branch office of the insurance company and providing the policy number. This way, you can obtain FUP information even without the receipt. This process is essential for expediting the approval of the death claim.
Grace Period in Life Insurance Policies
Grace period plays an important role in life insurance policies, especially when the policyholder's life insurance policy premium is not deposited at the time of his death. Now if you want to understand what is the important role of grace period at the time of death claim in life insurance policies, then it will be very important for you to understand what is grace period in life insurance policies?
In fact, in almost all life insurance policies, in case of not being able to deposit the premium by the due date, policyholders are given some extra time to pay the premium. This extra time given to policyholders to pay the premium is called grace period for life insurance policies.
Time Limit of Grace Period in Insurance Policies
Generally, life insurance policies, whose premium is deposited by monthly method, get the benefit of 15 days grace period. Example: Suppose a policy whose premium is deposited on a monthly basis. The date of its last premium deposit was 28 October 2024. Now suppose that the policyholder does not deposit the premium of this policy for some reason. So this policy will get the benefit of a grace period of 15 days after 28 October. In which this policy will provide the benefit of death claim.
But if there is a policy whose premium is deposited quarterly, half-yearly or yearly, then in such policies, the benefit of grace period is available for an additional 30 days from the date of last premium deposit.
Grace Period and Death Claim
If a policyholder dies during the grace period, then his life insurance policy will be considered eligible for death claim. Let us understand this with an example
Suppose that late Shri Nikhil Kumar Gupta ji had to deposit the last premium of his life insurance policy on 28 October 2024. Unfortunately, he dies in a tragic road accident on 18 November 2024 without paying the premium.
Now if Mr. Gupta had chosen the monthly option to pay the premium of his life insurance policy, then the grace period of his policy will end on 12 November 2024 itself. In such a situation, his policy will be ineligible for death claim. But if he had chosen the quarterly, half-yearly or yearly option to pay the premium of his life insurance policy, then he will get a grace period till 27 November 2024, due to which his policy will be considered eligible for death claim.
Things to Remember Regarding Grace Period
- The grace period rules may be different in different life insurance policies of different life insurance companies.
- Single premium paid life insurance policies do not have a grace period, because all the premiums of these policies are paid together at the time of issuance of the policy.
- Before reaching any decision regarding death claim, do check the rules regarding grace period for your insurance policy.
Special Benefits offered by LIC
All the rules related to Grace Period apply equally to all Life Insurance Companies in India. However, the information being presented further in this article is specifically about India's number one Life Insurance Company, Life Insurance Corporation of India (LIC).
If you are an agent or customer of any other Life Insurance Company, then you must find out whether your Life Insurance Company gives these benefits or not and if your Life Insurance Company gives these benefits, then whether this benefit is applicable to your Life Insurance Policy.
Social Objective of LIC
Life Insurance Corporation of India (LIC) is an undertaking of the Government of India. We feel that the Government of India tries to strengthen the future of Indian families financially by giving some convenience in various schemes of the corporation. This is the reason why the corporation is successful in providing the following benefits to its policyholders.
Benefits Given by LIC on Death Claim
Apart from the rules mentioned in the policies of LIC, the corporation provides some additional concessions in the context of Death Claim, which are as follows-
Death Claim Concession for Policies in-force for two years
If you have taken a LIC policy (except term and some special plans) and you have paid the premium of your policy for two consecutive years, but due to some reason you are not able to pay the next premium of your policy, then also your policy will remain eligible for Death Claim for 90 days from the date of First Unpaid Premium (FUP).
Understand with an Example:
Suppose that Mr. Omkar Gupta purchased an insurance policy from Life Insurance Corporation of India on 28 October 2021. Unfortunately, he passed away on 15 January 2024. However, it is being told by the nominee that he has deposited all the premiums of his policy on time, but the last premium has not been deposited.
Now the question is whether his policy is eligible for Death Claim?
To know the answer to this question, we first have to understand what were the premium dues of Mr. Gupta's insurance policy before 15 January 2024 and for how many years the premium of this policy has been deposited.
All Premium Dues before Death
- First Premium Due of Policy - Oct 28, 2021 (when the policy was issued)
- Second Premium Due of Policy - Apr 28, 2022
- Third Premium Due of Policy - Oct 28, 2022
- Fourth Premium Due of Policy - Apr 28, 2023
- Fifth Premium Due of Policy - Oct 28, 2023 (this due has not been deposited)
Note: On checking the above, it is found that just before 15 January 2024, the premium due of the policy will be 28 October 2023. If the last due of the policy has not been deposited as per the nominee, it means that Mr. Gupta has not deposited the due of this policy on 28 October 2023. That is, the First Unpaid Premium (FUP) of Mr. Gupta's policy will be 28 October 2023.
Checking the Eligibility for Death Claim
Since Mr. Gupta's policy was on half-yearly method, he will get the benefit of 30 days Grace Period from the First Unpaid Premium in his Insurance Policy, which has expired on 27 November 2023. On this basis, this policy will become ineligible for Death Claim.
But, this policy has been purchased from Life Insurance Corporation of India and the corporation gives concession to its policyholders for 90 days after depositing the premium of the policy continuously for two years. On checking on this basis, it is found that Mr. Gupta has deposited the premium of his policy for two years, due to which he will get the benefit of concession in his policy till 27 January 2024. Therefore, this policy of his will be considered eligible for Death Claim.
Death Claim Benefit for Policies in-force for three years
Life Insurance Corporation of India policies whose premium has been paid for three consecutive years. After this, if the premium is not paid for any reason, then the corporation gives a rebate of 180 days from the First Unpaid Premium (FUP) for the Death Claim in such policies. However, at the time of payment of Death Claim, the amount of outstanding premium will be deducted along with late fee.
Death Claim Benefit for Policies in force for five years
Life Insurance Corporation of India policies whose premium has been paid for five consecutive years. After this, if the premium of that policy is not paid for any reason, then the corporation gives a rebate of next twelve months from the First Unpaid Premium (FUP) for the Death Claim for such policies. Here also, the amount of outstanding premium is deducted from the payment of death claim along with late fee.
Rules for Special Insurance Policies
Nowadays, almost all Life Insurance Companies offer special types of Life Insurance Plans for customers. The specialty of these plans is that after paying premium for a certain period, if the policyholder is unable to pay the premium for any reason, then such plans still provide the facility of long term auto cover.
For example, Life Insurance Corporation of India had a plan named Bima Gold. The rule of this plan was that if the policyholder pays the premium of his policy for two years and due to any reason he is unable to pay the premium of his policy, then this policy will remain eligible for death claim for the next two years.
Evaluation of Premium Status in Death Claim
I am confident that now you can assess whether the Life Insurance Policy is eligible for Death Claim or not on the basis of Premium in reference to Death Claim in any Life Insurance Policy.
If you are a Life Insurance Agent, then for Death Claim for any Life Insurance Policy, first of all you must confirm on the basis of premium whether that Life Insurance Policy is eligible for Death Claim or not. Briefly know how to evaluate the premium status for Death Claim
- Check the First Unpaid Premium of the Policy: In case of death claim in life insurance policies, first check the FUP of the policy of the deceased policyholder and assess whether the policy was in force condition at the time of the policyholder's death or not.
- Review of Grace Period: If the policy was not in force condition at the time of the policyholder's death, then check whether the policyholder's death occurred during the grace period.
- Assess the Premium Payment Period:
- If the policy has also crossed the Grace Period at the time of the policyholder's death, then check for how many years the policy premium has been deposited.
- Now, know whether the concerned Life Insurance Company provides any other facility for Death Claim as mentioned above in the context of Life Insurance Corporation of India.
- If the concerned Life Insurance Company offers any additional facility for Death Claim, then assess whether the Life Insurance Policy of the deceased policyholder meets those conditions of the company.
- Review of Special Provisions of the Policy: If the Life Insurance Policy of the deceased policyholder does not meet any of the above conditions, then find out whether any special rules related to Death Claim (eg, additional two years of auto cover) apply in the policy terms.
Determining Death Claim Eligibility Based on Premium
If the Life Insurance Policy of the deceased policyholder meets any of the 4 conditions mentioned above, then you can consider such policy eligible for Death Claim based on Premium. In such a situation, as a Life Insurance Agent, you should advise the nominee of the policy or the claimant to submit a formal Death Claim Intimation to the concerned Life Insurance Company as soon as possible.
Conclusion
It is very important to understand the premium related conditions before submitting a Death Claim Intimation for a Life Insurance Policy. Especially if you are a Life Insurance Agent. Based on this assessment, you can better guide the nominee of the policy or the claimant regarding the payment possibilities. By doing this, you create a better professional image and you also avoid unnecessary disputes.
Know in Detail in the Video
To know more about the information given in this article, watch the video given below carefully till the end. If you have any questions in this regard, then write your questions in the comment box of the video.
