Let us help you understand the process of claiming life insurance for missing people.
Life is so uncertain and there are numerous conditions when a person has been missing for many years. What happens to such a person's life insurance policy?
Does the partner or beneficiary or assignee pay the premiums and continue the missing person's life policy in force?
It is common that if premiums are not paid within the grace period, a life insurance scheme lapses and the benefits are no longer available under such circumstances.
Normally, when policyholders shift to a new place they inform about the same to their friends, gas agency, bankers but forget to do the same to their life insurers. In the same way, it has been observed that the case of a missing policyholder is not communicated with the life insurance company till the time the benefit are due under the policy.
Assumption of death
Do you know the process of declaring a missing person dead? Basically, in the normal case of death, for claiming life insurance, the beneficiary or nominee has to submit the death certificate which would be issued by the local authority in the area of the insurer.
But in case of a missing person this would not be possible to do, as per the Indian Evidence Act, a person needs to wait for around 7 years from the date on which the report of missing is registered which we usually call FIR. After that they require a presumption of death certificate from the court.
After getting the certificate, how and when the claim is paid? Once the nominee gets the court order after 7 years of the person being missing, the insurer processes the claim and provides it.
However, the nominees of the life insurance plan or the insured's family should have paid the premium for 7 years to continue the policy and to get the claim.
Can the insurance company pay the claim before 7 years? Basically, there are two types of situations when the insurer can make an exception.
Evidence of loss
If there is clear cause or situation to consider that death has occurred, insurance companies may release the claim before 7 years also. If the amount of the claim is high, or there is a claim in the start of the insurance policy, the company will have a careful discussion and query before releasing the claim. That said, in most cases, which are not out of usual calamities, it is hard to get claims out prior to 7 years, as there is no incidental evidence of loss.
In cases when claim is released before the 7-year period, insurers may also ask the customers to issue protection bond, which needs the nominee to return the claimed amount, if the insured member is found alive later, after paying the claim.
If the person is found alive after a period of 7 years, then also nominees have to pay the money back to the insurance company.
In cases such as natural disaster, terrorist acts, plane crashes etc where the government has released a list of missing people to be presumed dead, most insurers take it into consideration. They curtail the 7-year clause, and make the claim payment.
Insurance companies are asked to be lenient by the government in their paperwork in case of natural calamities.
In case of assumed death of a person in 7 years, nominees are required to pay the premium on behalf of the missing till the settlement. The family may be required to sign an indemnity bond to return the claim amount in case the missing person returns.
Illustration: Uttam Ghosh/Rediff.com
Naval Goel is CEO and Founder, PolicyX