No claim rejection for life insurance policies older than 3 yrs – IRDA

POSTED BY manish ON December 6, 2015 COMMENTS (142)

There is very good news for those who have bought life insurance policies (especially term plans). From now on, life insurance companies will not be able to reject claims for any policy which is 3 yrs old.

Yes, you read it correctly.

no claim rejection for life insurance policies older than 3 yrs

No Claim rejection after 3 yrs

If your policy is 3 yrs old, no matter what happens, the life insurance company will not be able to deny the claims. There was an amendment in the sec 45 of the Insurance Act 1938, and due to that now onwards a policy can’t be denied a claim because the policy-holder gave some wrong information.

As per IRDA, the company has 3 yrs in hand to detect any misrepresentation or misstatement from the customer side and reject the policy. However, once this period is over, the insurer will have to settle the claims.

What this means is that those investors who were highly suspicious of insurers intention and always kept looking at the claim settlement ratio numbers don’t need to worry now.

While this seems to be great news, one should think of what kind of implications will arise out of this change. I can think of few of them

1. It will not be easy to buy life insurance

The major impact of this change will be that now the medical tests might get more details checking a lot of things. Till now insurers were bearing all the costs, and I think it will happen in future also, however I think this will result in higher premium amount, which I think investors will not mind because now there is a guarantee of claim settlement

2. Chances of Fraud in life insurance space

Already, there are many frauds which happen in life insurance space from customer’s side. I remember an episode of Crime Petrol, where a man planned his death so that his family can get the life insurance money, however he didn’t get the money because he was not able to execute the plan.

However, with this new change – the chances of fraud and misrepresentation can increase. Imagine a smoker or a person involved in risky activities. A lot of people like these to not disclose these facts because their application might get rejected or the premium might rise. So a lot of people suppress disclosing this fact and it’s going to be hard time for companies to figure out these things. There will always be few cases which will not come under their radar.

What do you think about this latest development? If you hold a life insurance policy already, how do you see this new change?

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142 replies on this article “No claim rejection for life insurance policies older than 3 yrs – IRDA”

  1. Satish Iyyappa says:

    Dear Manish . having taken a policy of HDFC life Uday one year back, the policy holder dies of an heart attack. He also had an angioplasty three years ago.will he be given his claim with out a problem. Thanks
    s satish

    1. The policy has not been 3 yrs old . So we cant say

      If the policyholder had not disclosed all facts, then it will not be paid

  2. Ajay says:

    Hi Manish,

    I just to go through your website accidentally & I am impressed with your valuable comments for the queries being raised. I am 33 yrs old & now planning to buy a term insurance for 32 yrs ( upto age of 65 yrs) with 1 Cr coverage. While analyzing in various insurance companies variants, found Aegon to be the lowest premium including the riders. In comparison with other giants such as LIC, HDFC, ICICI & SBI for 1 Cr, the difference in Aegon premium is 60% lesser than the rest. But considering the claim settlement ratio & company recognition , I am confused to proceed. Hence would request your kind advice on this policy. Also, please suggest other suitable policies if there are any.
    Thanks in advance !!!

    1. Hi Ajay

      I can see that you are thinking of buying a term plan. ALl you need to do is leave your details at https://www.jagoinvestor.com/solutions/buy-life-insurance-plan

      Our team will get in touch with you

      Manish

  3. Mahesh says:

    Hi Manish,

    I am a regular reader of your website. Recently while browsing through few other blog site, I came across an article on mintwise.com stating that claims settlement ratio is not fully reliable. Here is the link for that article.

    http://www.mintwise.com/blog/claims-ratio-insurance-companies-india/

    Currently I am looking to buy a term plan from Future Generali but its claim settlement ratio is lower than 85%. What should be the benchmark for this ratio? Can i consider Future Generali for term plans?

    Thanks,
    Mahesh Nayak

    1. It does not matter now . Now after 3 yrs of policy being in force the claim has to be settled anyways . New rule from IRDA

      1. Anand says:

        Even if the policy is taken in 2012 and continuing ?

        1. Its applicable for all the policies – Old and New both !

  4. vikaschaudhary says:

    Dear Manish ji
    I purchased a term insurance plan of 50 lac from Max life in April 2016 but my LIC agent says that you purchased term insurance from a private company and all private companies will not give money to your family in case of your death as all private companies aim is earn money only. so please take term insurance from LIC only. please give me your valuable suggestions.

    1. Thats not true. He is misguiding you totally. I also have a term plan from a pvt company only. He wants to sell you only LIC because he gets commission. Dont trust him and change him 🙂

      Manish

      1. vikaschaudhary says:

        Thank you very much sir

  5. Amaya says:

    This is great news for sure and everyone will benefit from it. I would personally suggest TATA AIA life’s Smart growth plus plan which is a very good plan and, it offers flexibility in choosing policy term, has good policy returns and tax benefits u/s 80C & 10(10D).https://www.youtube.com/watch?v=p6taJlYgVgY

  6. praveen says:

    Hi Manish,
    The above things have been given in exclusions in policy brochure of hdfc, lic n icici pru. Currenyly i have term plan with hdfc n lic. Will it be still applicable because it is in exclusion clause in brochure.

    Regards,
    Praveen kumar S

    1. Yes, whatever is there in brochure will be applicable

  7. Prateek says:

    Sir, I have some queries regarding Pure Term Insurance:
    1- In term plan which type of death is covered…actually i am confused about which type of death is really covered under pure term insurance, as death is occur mostly due to (critical or by normal) illness, or by accident but for them insurance companies are providing external riders….like critical illness cover and accidental cover etc separately for covering them….
    then which death cover they are providing under pure term plan…
    2– If one take Pure Term Insurance Plan, then does his/her family will get any money if policy owner decease due to accident/illness after 3 years ?
    and what about if death occur before 3 year of policy issued…
    3–If claim settles, then does claim paid amount to family equals to sum assured amount in policy(when it issued)?

    Regards,
    Prateek Varshney

    1. Hi Prateek

      I think you have many questions regarding that, if you can pass on your contact number to us , I will connect you to my teammate who will call you and help you in resolving your queries.

      Just fill up this form – https://www.jagoinvestor.com/solutions/buy-life-insurance-plan

  8. j says:

    Sir can I go cheapest online term plan being making myself sure that after three year all will be settled easily if nothing happens within three first months???

    1. Yes, you can go that.

      Let me know if you are interested in term plan , in that case we can connect you to HDFC team with whom we have a tie up for our readers.

  9. Sanjay says:

    Hi Manish,

    I have taken a term plan for Rs.1 Cr in Jun 2015 from Edelwiess. I was about to change the insurer this year while due for renewal because they have a bad claim settlement ratio (~55%) . With the above good news I need not have to go for this is what i think now. Could you please advise me?

    Sanjay

    1. sanjay says:

      Hi Manish,

      Could you please reply to the above? Thanks.

    2. Yes, you dont need to change it now !

      1. Sanjay says:

        Thank you very much for your reply.

  10. Siddhesh says:

    Hi Manish, I started reading your blogs few months ago and these are very useful. Thanks for the good job that you are doing. Requesting your help to clear below doubts on life & personal accidents:

    1. It seems that the maximum death benefit coverage that one can get under Life Insurance is 20 times the annual income of the person. Does this death benefit coverage cap also include or exlcude the benefits that can be received under the employer group life insurance policy? Say a person with Rs.10 lakh annual income buys two life insurance policies from HDFC Life & ICICI pru for 1 CR each and also has a cover of 1 CR under the employer group life insurance policy. Upon death will he get 2 CR or 3 CR? Lets assume that he has made all disclosures.

    2. It seems that the maximum death benefit coverage that one can get under personal accident Insurance is 10 times the annual income of the person. Does this death benefit coverage cap also include or exclude the benefits that can be received under the employer PA policy? Say a person with Rs.10 lakh annual income buys two PA insurance policies from HDFC Life & ICICI pru for 50 each and also has a cover of 50 Lakh under the employer Health insurance that has a rider for PA insurance as well. Upon death, his max benefits under PA insurance will be 1.5 CR or 1 CR only? Lets assume that he has made all disclosures.

    3. Say above person dies due to accident, maximum death benefit coverage that one can get under life + personal accident Insurance is 30 times of the annual income of the person (20 times from Life and 10 times from PA). Is this correct?

    1. Its not like that. this 20 times and 10 times is just a high level guideline. You can also get it more than that if the company is ok with it. But once you have got it, you will get the money later at the time of claims !

  11. Veeresh says:

    Hi Manish,

    From when is this rule applicable? Is it from 28/10/2015.

    Thanks in advance.

    Reagrds,
    Veeresh

    1. Its already applicable now . Even for all older policies

      1. Veeresh says:

        Thanks for the info Manish.

        Regards,
        Veeresh

  12. Raj says:

    Hi Manish, Today I have completed medical examination for LIC’s eTerm policy. I have already made the payment. In policy, I have mentioned that,

    1) I was admitted in hospital for Typhoid 5 years back.
    2) My father is expired due to heart attack.
    3) My mother is having Thyroid and BP.
    4) My sisters health is not well.

    What are the chances of rejection of my policy depending on above points. What LIC can do in such situation? Did I do correct by mentioned all the above truth?

    1. Hi Raj

      We cant answer that, It would depend on the underwriting process of the company

  13. rahul says:

    Hi Manish,

    3 years back, I purchased HDFC Click 2 Protect plan (Online) for my spouse and me of 50 Lakh each.

    I didnot get any intimation about medical test requirement on phone, email or through any other medium. Recently I met a sales person of HDFC Life who told me that it is strange that I haven’t gone though any medical test. My policy is still inforce and I am going to continue it.
    I want to know absence of medical tests will affect policy claim in any case?

    Regards,
    Rahul

    1. There is no issue as such if medicals are not done. Medicals are done only beyond a sum assured and age. If you are young, its not required

      Manish

      1. rahul says:

        Thank you Manish.
        I was 29 when policy is issued. No drinking and No smoking profile. May be that is reason.
        Should I seek for a letter from HDFC Life that lack of medical test will not affect claim, just to be on safe side.

        1. No there is no need for that..

          1. rahul says:

            Thank you Manish!

  14. Shravan says:

    Well, a good move by IRDA. Insurance companies will now need some kind of detectives as well :))

    1. Thanks for your comment Shravan

  15. Kevin says:

    Hi Manish,

    Thanks for the great info as always.
    I am an NRI based in UAE. I checked out the HDFC website to purchase policy online. However i cannot enter anywhere that I am based out of India.
    Also, what is your opinion on which riders I should go for?
    I was thinking of the waiver of premium rider and disability rider.
    Please adivse.

    1. Hi Kevin

      Riders are based on your personal choice, What I like might not be right for you, So better you choose which riders are better for you

  16. AtulYadav says:

    Hi Manish !!

    Suppose I Purchase Term Plan Today. Say after 2 Years I go for some Higher Studies. I will be definitely paying premiums but If something happens during my Post Graduation years, will company pay my nominee the entire amount ? Is there any chance that they can reject my claim since I will be non working that time ?

    1. No atul

      There is no reason as such why company will decline the claim. There is no requirement that you need to be working !

      Manish

      1. AtulYafav says:

        Thank U Manish !!!

  17. MD RAZI HAIDER says:

    Dear Mr.Manish
    I have taken one Plan from Max Life and Paid 4 years and after that It was about to mature on Dec-2014.
    Before that ,Company sent me mail & SMS to revive the policy for the complete benefit and contacted to company and they replied that they would revert back.
    After that they refused to pay me money back and other benefits.
    I lodged a consumer case on Nov-2014 and it was judged on 17th Dec-2015,against my request for that mail & SMS .
    Now How to file this case with State Consumer forum now.
    Guide me.

    1. You need to check this on internet .. Its not a one line guidance ! .

  18. Uday says:

    Hi Manish,

    I am a software engineer of age 25 . I want to take a term insurance plan , I compared between many companies , I found out that the private players are providing lower premium (Ex : Religare , Reliance etc..,) . But I personally have a doubt , Will the private players still be in market after , say 30 years ?? What is the assurance that they will prevail even then ??

    1. THere is no assurance like that !

      1. Asha says:

        Hi Manish,

        Since every insurance company is regulated by IRDA and if an insurance company goes out of business after 30 years, I heard that IRDA ensures the customers will not be affected by that. If this is not true, then what is the use of IRDA in customer’s perspective?

        Regards
        Asha

        1. When you say “ensure” it means that IRDA takes care of all the regulatory things and make sure that a company cant engage in fraud and all . Generally when a company goes down, its taken over by another .. However there is no obligation from IRDA side like this.

  19. Anurag says:

    Hi Manish

    I had taken one term plan in 2012 , and due to the fear of policy rejection , I did not mention the correct details about the reason of death of my father. I stopped paying the premium of that policy , and thought that I will take one new policy.

    What you suggest now ? Should I pay the premium of the old lapsed policy ? or shud I tell them the correct reason now ??

    Please suggest.

    1. Anurag says:

      Manish , can you provide any suggestion ?

    2. You can revive the policy now . NO need to take a new one !

  20. Utsav says:

    Hello Manish,

    Thank you for the great News! 🙂

    I bought a term Plan in 2013 after reading your articles only. It was for SA 50 Lacs, now i wish to update it for 70 Lacs.

    Will these 3 years be counted again as the policy will now have a SA of 70 Lacs. or they will consider the starting of policy as 2013 only. Please suggest.

    Regards
    Utsav Jain

    1. I am not clear on this Utsav. Check with the company only !

  21. Raj says:

    I want to know Manish :
    My wife has bought Term Plan while she was working .Now she is not working so
    1.Still term plan is valid for her even though she is not earning now ?
    2.if something happens, will she get insured amount while she is not working ?
    3.Do I need to inform Insurance company that She has left job now ?

    1. 1. Yes
      2. Term plan pays the family members in case of policy holders death only
      3. NO

  22. PremSharma says:

    Hi Manish,

    I got rejection from couple of companies just for past history of kidney stones. And if i declare this rejection in my new application with new company as well, they will also get suspicious and reject the policy although the medical condition does NOT exist anymore? Does this law mean we can hide such information as well and get the policy. And after 3 years of policy completion, NO MATTER WHAT, they can NOT reject the claim based on this information hiding ? please clarify . Thanks – Prem

    1. Prem

      This new rule does not encourage that. But what you mentioned is true. IF company cannot find out in 3 yrs regarding your illness , then you will be covered not matter what, But I dont think it will be the case. I dont enncourage that

      Manish

  23. siddesh says:

    hai manish…very good information. u r doing good job.

    Reliance and Bharti axa had declined due to honest disclose of my my medical history ( kidney stones).

    shall i hide it in future term policies? so after 3 premiums i nedd not to worry.

    1. sunil b says:

      Please do not hide anything from the insurance company.

      1. DeepakJain says:

        But then how would Siddesh get the insurance cover? every company will keep on rejecting his policy ? i think it is still better to get some cover at the cost of the premium ( hoping that this law would work in its complete effect) rather than being completely uncovered. what is your view manish ?

        1. Companies do cover people with higher premium like this, But it cant happen in every case. If a company feels that a person is not fit for its policies, they can reject it . Its a business at the end of the day

          Manish

    2. But hiding will not help . The company will be able to figure out that and in that case it will be trouble for you

  24. Rachana says:

    The gain for Insurer here is that the client will stuck to the same term plan at least for 3 yrs …in fact for the whole term years, knowing thefact that unknowing can happen any time !!!

    So my question is if I have shifted to a new Insurance company a year back, I still have to complete 2 more years to be eligible for this benefit, isn’t it ?

  25. KarenBeale says:

    Nice article….Insurance company should do the client verification tightly. Its there job.

  26. Abhijit says:

    This is such a great news for all those who have term insurance.
    Thanks for sharing the info & thanks a lot for all the updates. It is only because of you I took few great steps towards my personal finance. Term plan was one of them which I took exactly 3 years back.

    Cheers!

    1. Thanks for your comment Abhijit

  27. vishal says:

    nice one sir
    thank you

  28. Amarjeet says:

    Hello Manish,
    You won’t believe I am following all Insurance companies since last couple of months and looking into their claim settlement ratio. But Now I can go with Term plan with top companies without worrying their claim ratio.

    1. Thanks for your comment Amarjeet

  29. GomathiShankar says:

    Thank you so much for sharing Manish.

  30. Rajesh S says:

    Thanks Manish for this article. I was worried about my term plan which i took for covering home loan and self. Now i am feeling good. A complete relief. Thanks.

    1. Glad to know that Rajesh ..

  31. DK says:

    Good rule…….Insurance company should do the client verification tightly. Its there job. But I dont think cost will increase drastically! No!!, It may go up by 10-20% but It is okay to pay for assured settelement. I am okay with this.

    1. Thanks for sharing that DK

  32. Atit says:

    Hi Manish,
    Can you provide details & analysis of good online term insurance for 70 Lacs to 1 Cr cover as on date?

    1. Rajesh S says:

      I suggest go for LIC online term Plan. Not that cheap but it works when someone is no more. I saw one case where LIC was settled in 8 weeks and Private company took around 6 months for accidental case.

    2. Atit

      If you need one name, I can tell you HDFC term plan is a good one. We also have special tie up with them. YOu can fill up the form below if you want us to connect you with them

      https://www.jagoinvestor.com/services/life-insurance

  33. Happyinvest007 says:

    Thanks Manish for this nice article. Keep it up and very grateful to you for providing such a nice and important new with us.

    Usually I read newspapers but I didn’t find this information anywhere. (May be I have missed somehow). But thaks to you ans Jagoinvestor team for kepping up-to-date with current happening and different types of fantastic articles.

    Keept it up this great work 🙂

    1. Thanks for your comment Happyinvest007

  34. Manoj Gupta says:

    Hi !

    I am a firm believer of taking Term plans for insurance purpose, but was afraid of the claim been rejected & the very purpose of the policy taken by me may be rendered fruitless..
    I had maintained a file with all communication exchanged with the insurance companies / agents (with contact details) for reference of my family….so that they may not face any claim denial later on.
    This step taken by the IRDA is a very good move to safeguard the interest of the people at large..appreciated.

    1. Glad to know that Manoj Gupta ..

  35. Manish says:

    This is good news for policyholders. Thanks for information

    1. Thanks for your comment Manish

  36. shivdas says:

    sir, what will be the decision in policies taken before with or without medicals but contacted new health problems.

    1. All policies are covered under this rule

  37. Romit says:

    Hi Manish,

    Does this mean that we should simply buy term plan from insurer offering lowest premium? As the other factor of claim settlement ratio has been taken care of.

    1. Anjan says:

      Very valid question! I was thinking on the same line. Why pay 2-3 times more for an LIC term plan now if every insurer must honor a claim made after 3 years.

      OTOH, I think because of this new rule, price disparity between plans of different insurers might actually disappear or atleast reduce significantly. Cheaper insurers will no doubt increase the premiums because taking everyone’s medical test will cost them a lot. This could actually be a very short window to buy a term plan before we see a price upheaval.

  38. sudheer says:

    Thank you for sharing this information.
    Is it applies to health insurance?

    1. ritesh says:

      No its only for Life Insurance

  39. Askgeo says:

    The only problem is agents will now mis sell policy with out informing the insurer about the client medical history, if the client knows it ,he will hide details, insurer have to compulsory do medicals so that they take only good people. Other wise now govt and pvt are at level playing field.

    1. Hi Askgeo

      I believe the medicals will be surely done hence forth !

  40. Ranjit says:

    Thanks Manish,this would to be a great information to all policy holder.

    1. Glad to know that Ranjit ..

  41. AnantaDas says:

    Hi, I have a term plan (LIC Amulya Jeevan-II) for RS. 40 Lacs upto 25 years, running from Feb/2015 and Half yearly premium Rs. 7,200/-. Am I cover under new changes?

    1. Hi AnantaDas

      Yes, its applicable to all policyholders including the old one’s

      Manish

  42. Vishal Mishra says:

    This is very good news for the existing policy holders who are making payment for the last many years to secure his / her life.

    1. Thanks for your comment Vishal Mishra

  43. Raj says:

    Well this is a great move and is in interest of the policyholders but I am afraid of the fake policies with hideous and obscure intentions.

    1. Thanks for your comment Raj

  44. Vivek says:

    not a good news. India is a country of jugaad and such laws will trouble both companies and genuine customers. Companies will harass old customers in the name of compliance

    1. Agree with you to some extent

  45. JMS says:

    Manish ji , Is it applicable to those insurance plan like medical health plan etc..I had taken a medical coverage for mine and my wife from MaxBupa ?

    1. No , this is only applicable for life insurance policies

  46. SaKu says:

    Hi Manish, little off topic, but related to term insurance. i think i am paying higher premium for a little lesser cover (11.5k per yr for 1cr cover), what do you think will be best to do? discontinue the existing policy and buy a new one with bigger cover? or can the company adjust the cover bcos when i chk today 1cr cover can be bought at around 6.5k..
    Any help/guidance is greatly appreciated. Thanks

    1. I suggest you buy another one first and then close the old one after 2-3 yrs . Because it should not happen that you first close the first and apply for another and its rejected !

  47. Nitin says:

    Thanks Manish for this information.

    Is this applicable to existing polices also? I mean those policy already completed (or near to complete) 3 years as of now?

    1. Hi Nitin

      Yes, its applicable to existing one also

  48. drschin says:

    Are existing policies covered under this amendment or it will be effective for new plans only?

    1. Hi drschin

      Yes, its applicable to existing one also

      1. drsachin says:

        K. Thanks Manish

  49. Amol says:

    Thanks Manish for updates.

  50. niyazashraf says:

    Thanks

  51. Sachin says:

    Will this impact now on the premium rates? Definitely it will now be at par for term plans of the private players compared to LIC.

    1. Yes, it can increase the premiums . But not for old policies !

  52. MunishSIngh says:

    Dear Manish,

    Is it also applicable on Health insurance policies.
    rgds,
    Munish K. SIngh

    1. No, only for life insurance

  53. ramsaran says:

    what is rebate LIC Single Premium Endowment Plan (Table No. 817) Premium for income tax in f.y. 2015-16

    1. Hi ramsaran

      This is very specific query which you should follow up with the concerned authority only. We wont be able to comment on that

      Manish

  54. Suresh says:

    Is this change valid for already existing policies ?

    From which date this rule is effective ?

    1. Its valid for all policies – old + new.

  55. Jassi says:

    I hope that this is also valid for people whose policy is already more than 3 years old?

  56. Upender says:

    This is a great news and will bring piece of mind after buying the policy. However you rightly mentioned this would also lead to increase in premium and difficulty in buying policies specially high value one.

    1. Thanks for your comment Upender

  57. Ganapati says:

    Its wonderful news thank u sir
    Send me ur mobile no I want to share my existing stocks report with u

    1. Thanks for your comment Ganapati

  58. Dhiraj Malik says:

    It is a great news but it is triky for insurance companies to check on fraud, which might increase premium in future.

    1. Yes, thats the problem !

  59. Samir says:

    This is indeed welcome news, this provides lot of comfort and assurance to genuiene customers and would also bring in more new customers,

    1. Glad to know that Samir ..

  60. Nikhil says:

    Not a good change. If fraudsters are paid, then premiums will shoot.

  61. Ashish says:

    Hi,

    I feel this is a great news, especially because I have experienced a specific private Insurance company forcing negative medical test results on me perhaps to charge higher premium and also may be to decline claim at a later date.

    I have never smoked in my life, and 2 times medical tests conducted on behalf of Insurance company claimed me to be a smoker!! Can you imagine that! I warned the Insurance company that I will go to court, and then they actually issued me a policy 🙂 as a non-smoker. It happens only in India. Mera Bharat Mahaan.

    Now I feel relaxed that when the time comes for claim settlement (if at all), Insurance company will not be able to deny claim falsely claiming that I was a smoker :-).

    Very good job IRDA.

    Cheers,
    Ashish

    1. Thanks for sharing that Ashish

  62. Pushparaj says:

    This is a good news. Very good amendment to the act. Thank you so much for sharing the news.

    1. Thanks for your comment Pushparaj

  63. Nilesh says:

    This is a great news.
    Manish thanks for sharing this information.

    1. Glad to know that Nilesh ..

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