According to recent amendment to sec 45 of the Insurance Act 1938 claims on a 3 year old life insurance policy cannot be denied anymore. The Insurance Regulatory and Development Authority of India (Irdai), said that Life insurance companies must compulsorily pay all claims made three years after the date of commencement of a policy.
What’s in it for you?
This news came as a welcome move for policyholders as any new policy bought now one will be honoured at the end of three years compulsorily. This specially benefits term policyholders.
Even if the policyholder dies within the first three years and the claim is made after three years of the policy being operational, the beneficiary is entitled to the claim.
The amendment makes it clear that insurance companies only have a 3 year period to verify the details of the holder and check for any discrepancies, frauds and non-disclosures. In case of a fraud or non-disclosure by the policyholder, the insurance company has to discover and act within the three-year deadline. After that, the policy cannot be called into question.
Insurance companies fear that this move will add pressure on their underwriting process and even a small mistake in due diligence can cost them a lot. There is a speculation in the industry that that insurance frauds may go up.
But with easing norms in this sector, this seems like the best time to invest in a term insurance policy and safeguard the future of your family.
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