A life insurance policy is considered the deceased policyholder's estate or inheritance, and the legal heirs have a right to it. However, since these policies also allow choosing a nominee, there is some confusion about who can claim it.
Nominee Vs Heir
As per Insurance Laws (Amendment) Act, 2015, if a member of the immediate family is named as a nominee, the proceeds will go to them.
"Nomination is a matter of discretion exercised by the policyholder, and can nominate anyone beyond any blood relations to get insurance policy proceeds. However, spouses, children and parents will be the first eligible beneficiaries under the policy over the legal heirs. In the case of non-beneficial nominees, such as siblings, friends, and relatives, they can be treated as trustees, and legal heirs can claim the money in future under the policy in question," says Nitin Mehta, chief customer officer and head of digital business at Bharti AXA Life Insurance.
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Accordingly, if the legal heir claims the proceeds as per Hindu law, the legal heir will have to submit a legal heirship/succession certificate from the court, which will determine the split in proceeds.
Says Mehta, "The insurance company gives the proceeds of the policy to the nominee regardless of who the legal heir is. However, if the legal heir claims the money as per Hindu Law, the legal heir will have to go to court to decide the split in proceeds."
Nominees were not beneficiaries of life insurance policies before the amendment. They were only receivers of insurance proceeds on behalf of the policyholder's legal heirs. If the legal heir is receiving the claim proceeds, documents such as the succession certificate issued by a competent court are required.
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Steps To Claim Life Insurance Proceeds
Different insurers have different procedures laid in place to claim the proceeds. The process will be the same for both nominees and legal heirs, but proof of legal heirship/succession certificate will be required in case of a legal heir.
Let us take a look at how it is done at Life Insurance Corporation, India's largest insurance company, for a general understanding of the industry.
According to the LIC, the death claim amount is payable for policies where premiums are paid on time or where the death occurs within the grace period. LIC also requires a statement from the claimant with details about the deceased and the claimant, as well as a certified extract from the death register.
It is necessary to provide proof of age, original policy document and ownership documents to proceed if the policy was not nominated.
If the policyholder dies within three years of the first premium payment or from the date of reviving the policy, his/ hers medical attendant's certificate is also required.
Further, Claim Form B1 - if the life assured was treated in a hospital, Claim Form B2 - to be completed by the Medical Attendant who treated the deceased life assured prior to his last illness. A Certificate of Identity and a Certificate of Burial or Cremation are also required and signed by a prominent individual.
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The first information report, post-mortem report, and police investigation report should be submitted if the death was unnatural.
In cases of repudiation of claims, an opportunity is given to the claimant to make a representation for consideration by the review committees of the zonal office and the central office
