Many a slip between policy and payout

Putting together all the required documents and surmounting legal hurdles could be a challenge for the nominee

A nominee in a life insurance policy could often find it tough to make a claim. In India, the problem is compounded as the nominee is often a housewife, who is clueless about her husband's finances and has little experience of the legal and documentation process to be undertaken.

In India, family members often don't share information about financial holdings. As a result, the nominee is often unaware of how many insurance policies the insured had held, and could have difficulties in locating the original documents.

The next hurdle might arise if the insured did not specify a nominee. While most insurance companies do have internal processes that make it almost mandatory to appoint a nominee, slip-ups do happen, especially with older policies. In that case, the heirs will have to approach a court.

"The heirs will have to establish their claim as legal heirs in a court. After detailed verification, the court will issue a succession certificate, which they can then submit to the insurer," says Mahavir Chopra, director-health, life and strategic initiatives, Coverfox.com. Next, the nominee should compile all the documents required by the insurer (see table).
 

        Documents the nominees have to submit

• Filled up claim form
• Original policy document
• Death certificate issued by the municipal authority
• Nominee's KYC documents (Aadhaar card, driving licence, passport, etc)
• Cancelled cheque or copy of bank passbook
• ECS mandate for online transfer 
• In a natural death, the medico-legal cause of death and medical records such as admission notes, discharge summary and test reports
• In accidental death, copy of FIR, panchnama, autopsy report and driving licence of deceased

Sometimes, a name mismatch (of the nominee as mentioned in the policy document or of the insured in the death certificate) can cause a hitch. "In a minor mismatch, we only ask for an affidavit from the nominee," says Mohit Rochlani, director-IT & operations, IndiaFirst Life Insurance.

With a material error, however, the insurance company will not process the claim, due to doubts about nominee identity. "The nominee will have to approach a civil court, file a suit, provide relevant documents and explain the circumstances in which the error occurred and why he did not notice it earlier. If the court is satisfied, it will pass an order in the person's favour," says Asit Tewari, a Delhi-based lawyer.

If the nominee is a minor and no guardian has been appointed, the insurance company will again withhold payout. "The nominee will have to go to a court to get someone certified as his legal guardian," says Rochlani.

Sometimes, the nominee might be mentioned as X (say, the insured's wife) but a second person Y (say, the insured's mother) might also file a claim. The insurance company will again not make the payout, on the ground that there is lack of clear title. The two parties will have to approach a civil court, which will decide the beneficiary or beneficiaries. The insurance company will only comply when it receives a court order.

To ensure the proceeds go to a particular person or persons in a certain proportion, these details should be mentioned in the policy. Further, a will should be created. "In the absence of a will, there could be a legal dispute. Hence, create a will, with details of what and how much goes to whom mentioned clearly," says Anand Dalmia, co-founder, Fisdom.com. In the absence of a will, the nominee only holds the money in trust on behalf of the legal heirs and it has to be divided among all of them in accordance with succession laws.