A term insurance policy is bought for one reason. To make sure the family is financially protected if the earning member passes away. The claim process is what turns that promise into a bank transfer.
Most families will never have to go through it. For those who do, the process is more structured than it might feel at the time. Knowing the steps in advance removes some of the uncertainty from an already difficult period.
who can file the claim
The claim is filed by the nominee named in the policy. If no nominee was named, the legal heirs file it, and they may need to provide legal evidence of title, such as a succession certificate .
The insurance agent who sold the policy also has a duty to help the family with the formalities .
the steps, in order
Step 1: Intimate the insurer. The insurance company should be informed as soon as possible. The intimation includes the date, place, and cause of death . This can be done through the branch, customer care, or the insurer’s online claim portal .
Step 2: Submit the claim form and documents. The insurer provides a claim form. The nominee fills it and submits it with the required documents. A complete submission prevents delays .
Step 3: Document verification. The insurer reviews the death certificate, identity proof, and medical records to confirm the policy was active and the claim is valid .
Step 4: Investigation, if required. If the claim is made within three years of policy issuance, the insurer may conduct an investigation . For accidental deaths, the insurer may ask for a police FIR and post-mortem report .
Step 5: Payout. Once approved, the sum assured is transferred to the nominee’s bank account .
the documents that are usually required
The list varies slightly by insurer, but the core documents are consistent.
Mandatory for all claims:
- Original policy document
- Death certificate issued by the local municipal authority
- Completed claim form
- Nominee’s photo identity and address proof
- Nominee’s bank account details, such as a cancelled cheque or passbook copy
Additional for illness-related deaths:
Additional for accidental or unnatural deaths:
the timelines insurers must follow
The Insurance Regulatory and Development Authority of India (IRDAI) has set specific timelines for settlement .
- Death claims must be settled within 15 days of receiving all documents .
- If an investigation is required, it must be completed within 45 days of the claim intimation .
- The insurer must pay interest if there is a delay beyond the stipulated timelines .
The claim intimation itself should be sent within 90 days of the death. If there is a delay beyond the claimant’s control, the claim can still be considered .
the three-year protection window
Section 45 of the Insurance Act, 1938, limits how long an insurer can question a policy .
After a policy has been in force for three years from issuance, commencement of risk, revival, or rider addition, the insurer cannot call the policy into question on any ground, including non-disclosure. The only exception is proven fraud .
Within the first three years, the insurer can contest the claim on the grounds of fraud or material misstatement. But even then, if the non-disclosure was not deliberate, the premiums collected must be refunded to the nominee within 90 days .
For practical purposes, this means a policy that has run for more than three years is largely protected. The claim is paid unless the insurer can prove fraud .
what causes delays or rejections
Most term insurance claims are paid. The industry-wide claim settlement ratio runs between 96.9% and 99.6% . Rejections and delays usually trace back to a few specific issues.
Non-disclosure of medical history. This is the most common reason for rejection . If a pre-existing condition was not disclosed in the proposal form, the insurer may treat it as a material misrepresentation, even if the cause of death was unrelated .
Incorrect information in the proposal. Age, occupation, income, and lifestyle habits all affect underwriting. Mistakes or misstatements can complicate the claim .
Policy lapse. If premiums were not paid within the grace period, the policy lapses and the cover ceases. A death during the lapsed period is not covered .
Outdated nominee details. If the nominee named in the policy is no longer valid, the insurer may need additional documentation to establish the legal heir, which can delay settlement .
Missing documents. An incomplete submission is the most easily avoidable cause of delay. Keeping the policy document accessible and the nominee informed prevents this .
the tax treatment
The death benefit from a term insurance policy is fully exempt from income tax under Section 10(10D) of the Income Tax Act .
This exemption applies regardless of the sum assured, the premium paid, or the tax regime chosen by the policyholder. There is no TDS on the death benefit .
The conditions that apply to Section 10(10D), such as the premium-to-sum-assured ratio, are written for policies with a maturity benefit. A pure term plan has no maturity benefit, so those conditions do not affect the death payout .
what families should do in advance
The most useful thing a policyholder can do is make sure the family knows the policy exists, where the document is kept, and who the nominee is.
Keeping nominee details updated after major life events, such as marriage or the birth of a child, prevents complications later .
And paying premiums on time, ideally through auto-debit, keeps the policy active and the cover intact .
FAQs
1. How long does a term insurance claim take to settle?
The insurer must settle a death claim within 15 days of receiving all documents. If an investigation is required, it must be completed within 45 days of the claim intimation .
2. What happens if the claim is filed after three years of policy issuance?
After three years, Section 45 of the Insurance Act prevents the insurer from contesting the claim on the grounds of non-disclosure, except in cases of proven fraud. The claim is generally paid .
3. Is the term insurance death benefit taxable for the nominee?
No. The death benefit is fully exempt under Section 10(10D) of the Income Tax Act. There is no TDS and no upper limit on the exemption .
4. What is the most common reason for a term insurance claim rejection?
Non-disclosure of medical history in the proposal form. Even if the cause of death is unrelated, a material misrepresentation can lead to rejection .
5. Who can file the claim if there is no nominee?
If no nominee was named, the legal heirs can file the claim. They may need to provide legal evidence of title, such as a succession certificate .
