Revival, suicide exclusion and a form filled by the seller
Rakesh, 34, a salaried engineer in Nagpur, bought a 30-year pure term plan with a sum assured of ₹1 crore; the annual premium is ₹14,200 and the policy was issued in March 2022. He paid two premiums and then let the policy lapse in 2024 when he changed jobs. On 20 June 2025 he revived it, paying arrears with interest and signing a fresh declaration of good health. The POSP who had sold the policy helped him fill the revival form and ticked 'no illness' on his behalf, because Rakesh said he was 'fine now'. Rakesh died on 5 January 2026; the death certificate records suicide by hanging. His widow, the nominee, expects ₹1 crore and calls the POSP for help. The insurer's claims team has asked for the revival file, hospital records from 2024 and the post-mortem report. The POSP does not know whether the 12-month suicide clause runs from 2022 or from the revival date, and whether he has personal exposure for the way the revival form was completed.
1. Is the full ₹1 crore sum assured payable, or only a refund? Explain how the suicide exclusion and the revival date interact.
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The full ₹1 crore is not payable.
For non-linked life products, the suicide exclusion applies where the life assured dies by suicide within 12 months of the date of commencement of risk or the date of revival, whichever is later. In that event the insurer does not pay the sum assured; it refunds at least 80% of the premiums paid, excluding extra premiums and taxes. The clause limits anti-selection: someone who has just been re-underwritten at revival should not be able to convert that fresh cover into a death benefit within a year.
Here the risk was re-assumed on 20 June 2025. Death on 5 January 2026 is about six and a half months later, inside the 12-month window measured from revival. The relevant date is June 2025, not March 2022.
The outcome would be different for death by accident or illness in the same window: the sum assured would be payable, subject only to the insurer's right to question the revival. The nominee should be told to expect a refund of 80% of premiums paid, not ₹1 crore - and the POSP must not soften this with vague reassurance.
2. The POSP ticked 'no illness' on Rakesh's behalf. What are the consequences under Section 45 of the Insurance Act, 1938, and what should he have done?
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Section 45 bars an insurer from calling a policy in question on grounds of fraud or misstatement after three years from the date of issuance or revival, whichever is later. Within that window the insurer may repudiate, but only by written communication setting out the grounds and after giving a reasonable opportunity to respond.
Because the policy was revived in June 2025 and the death occurred in January 2026, a fresh three-year clock runs from revival, so the revival declaration is fully open to scrutiny. The insurer will compare the 'no illness' answer with the 2024 hospital records. If material suppression is established, the revival can be treated as void; the policy falls back to its lapsed state, and a pure term plan has no surrender or paid-up value, so the family may receive little beyond any refund the insurer chooses to make.
The POSP's own exposure is serious. Filling in or signing a declaration on the life assured's behalf is a breach of the conduct rules in the distribution regulations; it invites termination of his appointment, a compliance report, and potential civil or criminal consequences if loss results. He should have handed the form back and insisted Rakesh answer and sign personally.
3. What should the POSP do now - with the insurer, and with the widow?
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Three steps, in this order.
To the insurer: send a short, factual written statement - who filled the form, what Rakesh said, and that the 'no illness' entry was made by him and not by Rakesh. Do not edit or 'correct' the record retrospectively; an altered document turns a conduct issue into a fraud issue.
To the widow: explain the two possible outcomes candidly - 80% refund of premiums if the suicide exclusion applies, and no benefit if the revival is voided for suppression. Do not promise that 'companies usually pay'. Help her with the paperwork, but make clear that his help is free, because he is remunerated by the insurer and cannot charge a policyholder for claim assistance.
Boundaries: do not act as her authorised representative without written authority accepted by the insurer, and do not negotiate with the claims team on her behalf. Point her to the insurer's Grievance Redressal Officer, then IRDAI's Bima Bharosa portal, then the Insurance Ombudsman within one year of any rejection. Honest expectations now protect him later.