Life Insurance Claims and Policy Servicing
Life Insurance Claims and Policy Servicing
The Life Insurance Claims and Policy Servicing domain tests claim settlement and day-to-day policy administration: maturity, death, surrender, loans, nominations, assignments, revival and alterations.
Core rules and concepts
- Claim documents: claim form, death certificate, policy document, identity proof, medical or hospital records, and police report where relevant. Early claims are investigated more closely.
- Grounds for investigation: non-disclosure, suicide exclusion, accidental death rider conditions, and inconsistent documents.
- Policy servicing: grace period, lapse, revival with arrears and interest, policy loan limits, surrender value (guaranteed and special), paid-up value, nomination and assignment.
- Nomination vs assignment: a nominee receives the money as a trustee-like recipient; an assignee acquires rights in the policy.
Worked example
A whole life policy with sum assured 1,000,000 has annual premium 25,000 and a 20-year premium term. The policyholder pays 8 years and then dies after the policy lapses, outside the revival period. The paid-up value is (premiums paid / total premiums) × sum assured = (8/20) × 1,000,000 = 400,000, subject to policy terms. The claim is not the full sum assured because the policy was not in force. The reasoning: lapse removes full death cover but may leave a paid-up or surrender benefit.
Traps
- Treating the nominee as the absolute owner of the policy.
- Ignoring the grace period when deciding whether a policy has lapsed.
- Settling an early claim without investigating non-disclosure.
- Forgetting suicide exclusion periods and rider conditions.
- Calculating paid-up value on premiums paid rather than the premium term.
Key points
- Claim settlement requires both documents and eligibility checks.
- Early claims receive closer investigation for non-disclosure.
- Grace period, lapse and revival determine whether cover continues.
- Nomination and assignment have different legal effects.
- Paid-up and surrender values follow policy terms, not the full sum assured.