Early death claims under Section 45 of the Insurance Act

Early death claims under Section 45 of the Insurance Act

Swati was worried, insurance claim of Rs 100 lakh has been denied by the Insurance Company. Swati remembered that Ajit, her husband, was very responsible and proudly shared the insurance policy which he bought one year ago. Ajit died due to the pandemic Covid. She was already under shock and now the claim has been denied. She enquired from the Insurance Company and was told that Ajit had died within one year of commencement of insurance and claim has been denied under Section 45 on grounds of nondisclosure of health condition 

Ram Kumar was a nominee in the insurance policy taken by his father. His 50-year-old father died at home. Ram Kumar came to know that Ganeshi, his father, bought life insurance of Rs 5 lakh through a local bank. Ganesh collected all documents to submit to the local insurance office but officials refused to accept the document giving an example of Section 45.

One month back, Anil bought a Term life insurance of Rs 5 Crore with the hope that his family would be able to enjoy the same lifestyle in case of his death. Anil died in a car accident. His claim was rejected under Section 45 with reasons that Anil was drunk at the time of driving.

Ajit, Ganeshi, and Anil bought Insurance on their own to protect financial security to the family in case of their demise. They hoped that claim will be honored from the day of commencement of risk as given in the policy document. They did not know about section 45 which states that a claim can be denied in case of early death and the insurance company has the right to terminate the contract within 36 months of the insurance policy.

So all of us must know about early death and section 45 :

• What is an early death : If the insured event happen within 36 month of commencement of insurance or reinstatement of insurance then such events are called Early Death .
• Why Early death is critical for Insurance Company : Insurance is a contract of good faith where Insurance Company is accepting a proposal of insurance on the basis of declaration in the Proposal Form . To avoid adverse entry , insurance company treats all deaths within 36 months as Early death and has the right to investigate such cases . All Policy holders earn bonus on the financial performance of insurance company and their bonus will be impacted if Insurance Company experiences many early death . So Insurance Act gives a right to investigate all early deaths so that adverse claims are rejected . It also allows the insurance company to terminate a contract where they find out that wrong disclosures has been made .
• Misuse of Section 45 : Many genuine claims are rejected under section 45 and insurance companies refuse to reconsider them . Moreover , nominees are not aware that how to represent their cases . As the onus of argument and evidence is on Nominee , they are not able to collect evidences and accept the fate accompli with all bad word about Insurance .

So, what precautions can be taken by all to avoid insurance claim rejection under Section 45? 

1. Buy your Insurance Policy through an experienced agent . You agent is field underwriter and certifies about your health as agent is meeting you face to face . Select a good agent rather a good policy .
2. Ensure that all declarations are made regarding the following :

• Your health, declare all facts do not hide any details 
• Your height and weight 
• Your income 
• Your occupation
• Your habits like Liquor / Cigarette / Tobacco etc 
• Your hobbies 
• Details of all existing insurance on your life
• Details of any insurance policy which has been cancelled or rejected by insurance company.

3. Go for your medical check up and keep it with your family .
4. Share all insurances with your family and give  name of your agent .
5. Always choose annual mode of premium and pay renewal on time . Please note that you get 30 days grace period to pay renew your policy . After 30 days , policy lapses and goes in reinstatement mode for next 60 days . If you reinstate within 60 days , even then section 45 would apply and event of death is treated as Early death and claim can be rejected under Section 45 .

Section 45 is made for the interest of all Policy Holders who are genuine. Section 45 discourages all Policyholders who do not disclose facts due to which they have a higher probability of death. Section 45 also expects all Insurance Companies to work as fiduciary and all genuine claims are paid even if they even happen after one day of policy commencement. The basic purpose of insurance is to cover the risk of uncertain death. Death is certain but timing is uncertain, insurance companies are well aware of facts and need to be sensitive that no family of genuine policyholder suffers and loses faith in the institution of insurance.

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