Types of Life Insurance Claims

Claims Management Department

The claims department is one of the key departments in an insurance company. The claims department has the following functions to perform:

  • To provide the customers of insurance and reinsurance companies with high quality of service. This role gives a long-term edge to the company and hence is referred to as the strategic role.
  • To monitor the claims and see that whether the benefits of insurance exceed the costs of claims. This role is referred to as the cost-monitoring role of the claims department.
  • To see that the expectations of the customers are met with regard to speed, manner and efficiency of the service. This is called the customer service role of the claims department.
  • To meet the standard of service, to keep up to the customers expectations and still operate within the budget. This is the managerial role of the claims department.

Both the quality of the service and cost of claims is the responsibility of the claims department. The department has to look after the proper mix of the two. The cost of claims must not exceed a given level in trying to render a very good service to the customer. So the claims department should work with due diligence to balance the two parameters. The estimation of future liabilities is just as important as control over the claim payments. As the claims department is in direct touch with the customer, it has to ensure the quality of service.

The claims department has the sole responsibility of managing claims. Claims management by far is the most complex issue in an insurance company. The people in the claim department should have good interpersonal skills. If they are not able to irk in harmony the customers will not receive quality service. There should be sufficient number of people as managers so as to simplify job and proper human resource systems in place so that such persons are recruited whose philosophy goes with the mission and vision of the organization. It has become imperative for the claims department to provide quality service to the customers so that the corporate goals are achieved. The claims department, in effect, acts as an interface between the customer service quality and insurance company’s objectives. It has to be given the proper weight age and motivation so that the business as a whole functions well.

Types of life insurance claims

Understanding the requirements for various life insurance benefits (claims) is important for the customers. The overriding condition on claims is the payment of premiums i.e. claims are only payable if premiums are paid up to date. There are various types of claims under life policies. The most common claims include:

1. Death Claims:

This is a claim paid when then the person insured dies. For a death claim to be paid the following basic conditions must be fulfilled.

  • The policy document, original death certificate, burial permit copy of the ID of the deceased must be provided to the insurance company.
  • A report from the doctor who treated the deceased must be presented to the insurance company.
  • Claim forms must be completed
  • A report from the doctor who last treated the deceased person may be required.
  • A police abstract report may be required where death occurs through an accident.

The documentation required for payment of death claims are easily available and claimants need to immediately inform the insurance company where problems are encountered in securing the documents. The documents are usually required so as to reduce on the possibility of paying fraudulent claims or paying the wrong claimants. Many insurance companies will frequently waive certain requirements under certain special circumstances.

2. Maturity Claims:

A maturity claim is paid out mostly on endowment and education insurance policies whose duration has expired. For example in an insurance policy with duration of 15 years, the maturity value will be paid on the 15th anniversary after affecting the policy. Payment of a maturity claim is a straightforward affair where the customer returns the original policy document and signs a discharge form. The claim cheque is usually released in a period of about two weeks once all required conditions are fulfilled.

3. Partial Maturity Claims:

Most endowment and education policies provide for payment of partial maturities after a given duration. The partial maturity is normally paid on set dates in the policy document. A typical education policy of 10 years provides for payment of 20% of the sum insured after four years and every year thereafter until the expiry of the policy. The life insurance company usually prepares partial maturity cheques in an automated manner and the customer does not have to claim. The cheque is either sent directly to the customer or the nearest branch office for ease of collection.

4. Surrender Value Claims:

When a customer is unable to continue with the payment of premiums due to unplanned events like retrenchment or dismissal he has the option of encashing the policy to receive the surrender value so long as the policy has been in force for more than 3 years. The procedure for lodging this type of claim is very simple and is similar to the maturity claim whereby the customer returns the policy document and signs a discharge form. The claim cheque is then paid to the customer within two weeks.

5. Policy Loans:

This is strictly not a claim but a benefit given out by life companies for life policies that have been in force for at least three years. To receive a policy loan directly from a life company entails assigning the policy to the life company and receiving a loan cheque. The insurance policy can also be assigned to a bank and the loan is then granted by the banks and the policy document utilized as security for the loan.

6. Disability Claims:

This will arise in life policies where the customer purchases a personal accident policy rider as an additional benefit. Disability claims are payable subject to sufficient medical evidence being provided as proof of disablement.

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