Some months ago, two of my office colleagues had bereavements in their families and they filed claims for term insurance plans. From what they told me, in one case the claims process was very smooth, in the other there were endless rounds of querying, calls and investigations. Could it be because one of the companies was a public sector insurance company? Usually, what are the circumstances in which the claims are settled easily and when is the process prolonged?
Claim settlement experience varies by insurers. During 2015-16, the proportion of death claims paid vis-a-vis total claims ranged from 60% to 98% across insurers. This variability is not necessarily linked to ownership. That’s why, I recommend that while selecting an insurer, you must look at their claim settlement track record. Select insurers that settled at least 90% of their death claims.
Another metric that you may want to evaluate is the number of grievances raised against the insurer. This measures the number of customer disputes that insurer got into. Since it is natural for grievances to increase with book size, you could normalize grievances reported by the number of lives covered by the insurer. Opt for insurers with low grievance to lives ratio.
There are two scenarios where insurers are most likely to ask follow-up questions. First is the case of an unnatural death in the first year of the policy.
In individual term life insurance, suicide is excluded for the first year. Even in a case of accidental death, insurers would not want to rule out the possibility of suicide.
Second scenario is of a person dying due to a chronic ailment within the first 5 years of policy inception.
The insurer would want to verify whether the information submitted at the proposal stage by the insured was accurate or not. Common suspicions are around the smoking status of the individual and pre-existing conditions such as hypertension, high cholesterol, and diabetes.
I took a life insurance policy about 9 years ago. At that time I was a moderate smoker and drinker. Over the years my lifestyle changed and for the last 3 years, I have not smoked and have turned a teetotaller. Can I contact the insurer now to revise my status and reduce my premiums?
Each insurer adopts a different approach towards underwriting. If you have stopped smoking in the last 3 years, some insurers may be willing to consider you as a non-smoker.
A few insurers specify in their proposal forms that the proposer should not have been smoking in the last 5 years, to be considered a non-smoker.
You should specify the smoking history transparently in the proposal form and let the insurer decide thereafter.
In any case, life insurance premiums have gone down considerably over the last 9 years. It is likely that premium would have gone down for you, even as a smoker.
I have been living in the UK for the last 5 years and may stay here for some more years, depending on several factors. I will eventually return to India. I want to buy a term plan for myself. Should I buy the term plan in India or in the UK? Can I buy it in both the countries?
Term insurance issued in India is valid worldwide. In case of an eventuality even in the UK, the policy would pay the sum assured to the nominee. However, claims would be paid in Indian rupees only. If your nominee resides in India, then buying a policy in India will help in easy claim documentation and settlement.
Term insurance is a fixed benefit plan. So, you can buy multiple policies from different insurers in different countries. Claim amount will be paid by all the policies as per their respective terms and conditions.
While applying for a new policy, you should declare the active policies with other insurers.
Insurers use this information to determine the maximum sum assured that you are eligible to buy, after deducting existing coverage.
Abhishek Bondia is principal officer and managing director, SecureNow.in
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