LIFE INSURANCE CLAIMS AND THEIR TYPES MADHUMITA SARKHELSOME IMPORTANT WORDS INSURANCE -— A Contract by which financial losses suffered by a few are made good by many. RISK — Uncertainty of the occurrence of an event that can cause economic losses INSURER — The Company that gives Insurance (Insurance Company) INSURED -— An Individual who enters into the Insurance Contract also known as the Life Assured or the Policyholder POLICY DOCUMENT - It is the document which shows the legal contract between the Insurer and the InsuredSUM ASSURED - It is the amount that the Insurance Company pays to the Policyholder in case of an event PREMIUM - The consideration that the Life Assured agrees to pay to the Insurer as specified in the Contract or the Policy document POLICY TERM - This is the maximum number of years (period) the life cover in the policy will remain active PREMIUM PAYING TERM — The number of years that the consideration or the premium is paid FIRST PREMIUM PAID - It is the initial Premium paid on the Insurance policy FIRST UNPAID PREMIUM - It is the first default in paying premium by the policyholder. When a premium is paid a receipt is issued indicating the next due date. If this due premium is not paid it becomes the first unpaid premium.GRACE PERIOD - It is the period after the premium is due in which a policyholder can make a premium payment with continued risk IN FORCE POLICY — Where the Life insured pays all the premiums due LAPSED POLICY — Where all the benefits to the policyholder cease and is terminated due to non payment of premium on the due date or even after the grace period PAID UP POLICY — Where the policyholder stops premium payment but continues to enjoy insurance coverage* BONUS - It is an additional amount that accumulates to an insurance policy each year * PARTICIPATING POLICY — Enables a policyholder to share the profits of the Insurance company in the form of bonus. Also known as with-profit policy * NON PARTICIPATING POLICY — No profits are shared. Also known as without-profit policyWHAT IS AN INSURANCE CLAIM A claim on the insurance policy is the demand for performance of the promise made by the insurer to the insured at the time of making the contract. The insurer is obliged to perform his part of the contract if the insured has performed his.In simple words , Claim is a demand , for which , one has a right. A demand on the insurer , to fulfilits promise , as per the terms and conditions of the Policy is called a Policy claim. An Insurance Claim is > A formal request to the Insurance Company > Asking fora Payment > Based on the Terms of the Insurance PolicyTYPES OF CLAIMS In a Contract of Life Insurance there are three types of claims that may arise. > Maturity Claims > Claim at Periodic Intervals or Survival Benefit Claims > Death ClaimsTHANK YOUMATURITY CLAIMS MADHUMITA SARKHELA claim is paid on the happening of an event. A Maturity claim is payable , as per the terms of the Contract , at the end of the term of the Policy if the Life Assured lives up to that date. The end of the policy term is called the Date of Maturity. A Survival Benefit claim which is a guaranteed benefit given to the policy holder during or upon completion of the policy tenure is also a type of Maturity Claim. Insurance companies also have Annuity plans wherein a policyholder pays either a lump sum amount or regular instalments in the given period to get regular payments as long as one lives or for a pre-specified fixed period.DOCUMENTS REQUIRED FOR SETTLEMENT OF MATURITY CLAIMS Original Policy document Discharge form duly signed and witnessed Age proof in case age was not admitted at the time of issue of policy Document of Assignment in case the Policy was assigned An Indemnity bond is required in case at the time of settlement of claim the original policy document is not found or lost.PAID UP VALUE * Lapsed policy — When premiums are paid for less than three years the policy lapses. * Paid up policy — When premiums are paid for more than three years but then discontinued the policy acquires paid up value. * Paid up Value — SA * (no of prems paid /no of prems payable)SETTLEMENT OF MATURITY CLAIMS Insurers generally initiate payment of Maturity claims on their own very much in advance of the maturity date so that the policyholder receives the claim amount on the date of maturity. Once the maturity amount is paid the Insurance contract is revoked and the Insurance cover ceases for the Policyholder. There is another alternative for payment of Maturity claims known as Settlement option. Under this option the Policyholder can choose to receive the claim amount in instalments, spread over a specified period as per mutual agreement with the insurer.PAYMENT OF MATURITY CLAIMS Settlement of Maturity claims is less complicated since the claim amount is paid to the Life Assured. The Nominee is irrelevant . If the Policy is Absolutely assigned then the settlement is made in favour of the Absolute Assignee . The Maturity claim is equal to the Sum Assured plus Bonus and other Guaranteed additions if any. Any debt or charge under the Policy such as loan, loan interest, outstanding premium (due but not paid) will be deducted. The Discharge voucher will show the Gross amount of claim , the deductions, if any, and the Net amount payable. The Gross amount normally consists of the Basic Sum assured or the Paid up value, the Bonus payable, any excess deposit lying in the said Policy account and return of excess premiums collected ,if any.SURVIVAL BENEFIT CLAIMS In a Money-back policy , the insurance company promises to make payments of part of the Sum assured at specified intervals during the term of the policy if the Life assured survives the specific interval. The surviving Policy holder is paid on a specified pre-determined periods a percentage of the Sum assured as periodic Survival BenefitSETTLEMENT AND PAYMENT OF SB CLAIMS + For settlement of SB claims original policy document (which is returned to the policyholder after the payment is done ) and the duly signed and witnessed discharge form will have to be submitted to the Insurance company. + The specified amounts are paid on the due dates after deducting the outstanding loan interest, outstanding premium due, X-charge , etc. * Ifthe Policyholder dies after the due date but before the settlement of the claim the claim will be treated as a Death claim and paid to the legal heirs of the policyholder.ANNUITY * Annuity provides a regular income at the chosen retirement age. * Annuities are investments , made by an individual, with the aim of receiving a regular income on a periodic basis after a specified period or immediately. * Annuity is also known as a Pension plan.ANNUITY TYPES AND THEIR PAYOUTS + On the basis of Premium Payment 1. Single Premium Payment — In this type of Annuity a lump sum amount is paid as a single premium usually at the time when the individual retires. The Insurance company starts paying the Pension amount immediately after receiving the payment. This plan is usually chosen by older individuals who have not made financial arrangements early in their life and the lump sum payment is made through their retirement benefits. 2.Multiple Premium Payment — Here a series of payments is made by the Annuitant to the Insurance company for a fixed period of time . The Insurance company starts paying the Pension after the deferred period to the Annuitant . This type of plan is preferred by younger individuals .+ On the basis of Payment of Annuity 1. Life Annuity — The Insurance company promises to pay a certain amount of amount of Annuity to the Annuitant as long as the Annuitant is alive. The Annuity amount stops as soon as the Annuitant dies and the rest of the accumulated amountis returned to the beneficiary of the Annuitant. 2. Annuity certain — In this option the Insurance company promises payment of Fixed Annuity for a Fixed term. In the option the Annuitant can choose to receive Annuity payments for some specific period irrespective of survival of Annuitant. In case the Annuitant dies during the specified term , the remaining amount will be paid to the Nominee . If the Annuitant survives the chosen Annuity certain period , the Annuity will be paid for life.3. Joint-life, Last survivor Annuity — Here the Annuity is paid to the Annuitant for their entire life. On the death of the Annuitant , 50% of the Pension will be paid to the spouse for as long as the spouse lives . 4. Annuity for life with Return of Premiums — here Annuity is paid to the Annuitant as long as the Annuitant lives and oh the event i.e death Premiums are returned to the Nominee or Legal heirs. 5. Increasing Annuity — Annuity is paid by the Insurance company on any of the above terms but the annuity increases every year by a fixed rate or amount.THANK YOUDEATH CLAIMS MADHUMITA SARKHELThe payment of the SA amount in case the LA dies before the Maturity date is called a Death claim. An Insurance contract comes to an end with the payment of the Insurance claim. In the case of Death claim intimation of death has to sent to the Insurance company. Intimation may be sent by the nominee , any close relative or legal heirs.SETTLEMENT OF DEATH CLAIMS Intimation of Death The first step for the settlement of Death claim is the Intimation of death to the concerned Insurance company in writing. . The letter of intimation should have the following information — > > > Vv VV Vv Vv Name of the LA Policy number A letter stating that the LAis dead Date of death Cause of death Place of Death Relationship of the claimant with the LA Certificate of Death if available* Submission of Proof of Death Proof of Death is usually the Death Certificate which is issued by the Municipal Death Registry or by a Public Record Office which maintains the records of birth and death. Along with this some other certificates are also required. > Astatement by the doctor who last treated the deceased > Acertificate by the hospital where the LA died > Acertificate from the employer where the LA last worked > Acertificate of cremation or burial * Submission of age proof The claimant should submit an age proof of the deceased LA in case it was not submitted earlier. The following documents are generally accepted as valid age proof : > Birth certificate > School leaving certificate > Passport which is within the validity period* Proof of the Title of claimant If the policy has been assigned in a valid manner or the nomination is subsisting at the time of death no proof of title is required. In case there is no valid Nomination or Assignment, the claimant will have to produce satisfactory Evidence of Title to the Estate of the deceased from a competent Judicial authority. The authority may be the Administrator General or a Court and should grant > ASuccession Certificate or > ARegistered Will or A Succession Certificate is issued by a competent court on the question of right to the property of the deceased. It is issued on application and should specifically provide for disbursement of policy monies. If the deceased has left a Will a probate of the Willis required along with the copy of the Will.« Payment of the Policy When all the formalities are completed the Insurance company will issue a Discharge form which is to be signed by the person entitled to receive the policy money. According to the IRDAI Regulations a Life Insurer has to process the death claim without delay. Usually the Insurance company settles the claim within 30 days of the completion of all formalities and receipt of all relevant documents.CATEGORIES OF DEATH CLAIMS « Death claims are classified into 2 categories > Early Death claims — When a LA dies within 3 years of the date of commencement or revival of the policy the death claim that arises is an Early Death claim. > Non-Early Death claims — Death claims arising after more than 3 years of the date of risk or revival or reinstatement .SETTLEMENT OF NON-EARLY DEATH CLAIMS * Once the intimation of death is received and the Insurer is satisfied about the genuineness of the intimation , the status of the policy is verified and the required documents are called for . The normal documents required will be > Original Policy Document > Original Death Certificate > Claimant’s statement giving details of cause of death, nature of illness suffered, treatment, etc > Age proof Document , if not submitted earlier > Deeds of assignment if any > Proof of title of claimant > Discharge voucher duly completed , signed and witnessedSETTLEMENT OF EARLY DEATH CLAIMS In case death occurs in less than 3 years from the date of commencementor revival of the policy the following documents are required for the settlement of the claim — > Original Policy Document > Original Death Certificate > Claimant's statement giving details of cause of death, nature of illness suffered, treatment, etc Age proof Document, if not submitted earlier Deeds of assignment if any Proof of title of claimant Statement by the Doctor who last treated the deceased LA Statement by the hospital where the LA died Statement by the Employer about leave taken , if any, on health grounds Discharge voucher duly completed , signed and witnessed VVVVV V VvSETTLEMENT OF CLAIMS DUE TO ACCIDENTS * If death has occurred due to Accident or un-natural causes some additional documents will have to be called for — Post mortem report Police inquest report Panchanama report Magistrate’s report or Coroner’s verdict Forensic report > Chemical Analysis report or Viscera report The above documents would be required in early as well as non-early death claims. VVVV WVSOME TERMINOLOGIES SUICIDE CLAUSE PROXIMATE CAUSE or CAUSA PROXIMA REMOTE CAUSE WAIVER OF EVIDENCE OF TITLE CLAIM CONCESSION PRESUMPTION OF DEATH REPUDIATION SECTION 45THANK YOURIDERS AND BONUS MADHUMITA SARKHELRIDERS Riders are additional benefits or additional Insurance cover that can be bought and added to a basic life insurance policy. Allows to customize a policy to provide several kinds of protection Two or more riders can be blended Paying extra premium for supplementary benefit Generally opted at inception of base policy May allow later if mentioned in promotional material or policy bondRiders are defined benefit plans i.e fixed against an insured event Once rider policy is claimed rider terminates and the base plan continues Cheaper than stand alone policy Rider is applicable as long as the base policy is inforce The premium of health riders cannot be more than 100% of the premium under base product* Waiver of Premium Provides for waiver of future premiums in the event of occurrence of an insured contingency like death , disability, critical illness , etc Continuity of coverage/benefits avoiding financial strain In case of children’s plans the benefit of waiver of future premiums due to the untimely death of the parent whose risk is covered under the rider. No waiver of premiums available if the proposer commits suicide within one year of taking the policy. Generally available at the inception of the policy.* Accidental Death Benefit Rider Accidental deaths are sudden and unexpected in nature . The deceased’s family members face emotional and financial crisis. In such situations Accidental Death Benefit Rider is useful . A specified amount is paid by the insurance company on the happening of the event to the beneficiaries of the policyholder. The premium is nominal. The Benefit and Amount to be paid is defined in the Terms and Conditions of the Policy. The amount to be paid as benefit is normally double the amount of Sum Assured. However there is a maximum limit of SA up to which the ADB is made available. Some companies have limits of up to 10 lakhs, not on each policy , but on all policies of the deceased policyholder put together.Conditions where ADB will generally be paid * Death or injury was caused by outward , violent and visible means * Death was caused from the accident, solely and independently of all other causes * Death occurred within 120 days of the accident or such other period as may have been mentioned in the policyConditions where ADB claim would not be paid Death due to injuries resulting from rios , civil commotion ,war , hunting , mountaineering , scuba diving, para gliding , dangerous sports in general Death is caused by intentional self injury, attempted suicide , insanity , immorality or while under the influence of intoxicating or narcotic substances. Death as a result of committing any breach of law Death due employment in military service or police duty Death due to accident when a policyholder was engaged in aviation or aeronautics other than a fare paying paasenger in an aircraft licensed to carry passengers .*« Permanent Disability Benefit Accidents always do not result in death. Disability means not being able to perform 4 out of 6 activities mainly dressing , feeding , washing , toileting , mobility , transferring. In short the life assured is not able to earn a normal living and becomes a burden to the family members Examples of Permanent Disability are loss of vision of both eyes , amputation of both hands at or above the wrist amputation of both legs at or above both the ankles. In such cases future premiums are waived. It is neither a death claim nor a maturity claim. The policy does not end with settlement. An additional sum equal to the sum assured payable in 120 monthly instalments. SB and Maturity benefits are payable according to the policy terms and conditions. In case the policy matures or death takes place within the expiry of the 120 instalment period the remaining disability benefit instalments have to be paid.* Critical Illness Rider In the event of diagnosis of a critical illness a specified amountis paid. The amount as specified in the policy may be paid in lump sum or periodical payments. The illness should be covered under the rider and the payment is subject to the terms and conditions of the rider. The most common Critical Illnesses covered are Cancer , Heart Attack , Kidney failure, Paralytic stroke , Cardiac Surgery.BONUS The distribution of the Valuation Surplus or the profit of the Insurance company to the policyholder is known as the Bonus. This benefit is in addition to the Sum Assured It is available only for ‘Participating’ or ‘With Profit’ policies The ‘With profit ‘ policy should have run for atleast five years Bonus is a benefit given only for final paymentsTYPES OF BONUS * Simple Reversionary Bonus This Bonus is generally indicated as a percentage of the Basic Sum Assured under the policy and added to the Sum Assured. Such addition of Bonus to the Sum Assured is called Vesting and this type of Bonus is also called Vested Bonus. Vested Bonus is declared annually and remains attached to the policy payable only on Maturity or Death of the Life Assured. The Bonus declared for the subsequent years and if the policy continues to be in force will be added when the final payment of the policy will be made.« Let us take an Example SUM ASSURED - 1,00,000 BONUS DECLARED - 5% of SA or Rs 50/- per Rs 1000 BONUS PAYABLE - Rs 5000 TOTAL AMOUNT TO BE PAID - 1,05,000 (SUM ASSURED + BONUS ) IF IN THE SUBSEQUENT YEAR THE BONUS DECLARED |S 6% or Rs 60/- per Rs1000 BONUS PAYABLE IN THE SECOND YEAR - Rs 6000 TOTAL AMOUNT TO BE PAID - 1,00,000 + 5000 + 6000 - 1,11,000* Compound Reversionary Bonus In this method the Bonus is calculated on compound interest basis. The Vested bonus calculated on the Sum Assured in the first year is added to the Sum Assured and the second year’s Bonus is calculated on the total sum. This continues till the final payment is made.« Let us take an Example SUM ASSURED - 1,00,000 BONUS DECLARED — 5% of SA IN THE FIRST YEAR OR Rs 50/- per Rs 1000 BONUS PAYABLE - Rs 5000 TOTAL AMOUNT TO BE PAID - 1,05,000 (SUM ASSURED + BONUS ) BONUS DECLARED - 6%ofSA INTHE SUBSEQUENT OR YEAR Rs 60/- per Rs 1000 REVERSIONARY BONUS PAYABLE -105000* (60/1000) - RS 6300 TOTAL AMOUNT TO BE PAID - 1,00,000 + 5000 + 6300 - 1,11,300* Terminal Bonus This is a one time bonus provided for long term policies on attaining Maturity or Death of the policyholder so long as the policy has continued for a specified period. It is the sum added to the policy to the policy at the time of its Maturity only when the policy reaches the eligibility period mentioned in the policy document which may differ from one insurance company to the other. This works as an incentive for the policy holders to keep their policy in-force.* Interim Bonus This is payable on policies wherein a final payment becomes payable between two valuation dates. Bonus is declared after Valuation as on 31% March every year. Only the policies that were in force on 31% March would be included in providing the Bonus. The new ‘with Profit’ policies that commenced after 31st March would not be entitled to the bonus till the next valuation date. Hence Interim Bonus is declared for such policies that get concluded between two Valuations.THANK YOU