A lapsed endowment policy, a death claim and an agent's revival offer
Deepak Sharma, 44, took a 20-year participating endowment policy in March 2019 with sum assured ₹5,00,000, annual premium ₹27,600 due on 15 March, and paid on time in 2019, 2020, 2021 and 2022. He did not pay in March 2023 and never revived the policy. He died in a road accident in January 2027. His widow, the recorded nominee, files a death claim; the policy shows no loan outstanding. The branch's bonus record for this plan shows a reversionary bonus of ₹42 per ₹1,000 sum assured for each year the policy was in force, and a final additional bonus of ₹60 per ₹1,000 only for policies that have run 15 years or more and are in full force. Among Deepak's papers she finds an agent's letter dated July 2024 offering to revive the policy on payment of ₹92,000.
1. Compute the amount payable on the death claim, showing each step and explaining why the other figures in the file do not apply.
Read the worked answer
Step 1 - status at death. Four full years' premiums were paid, so the policy did not lapse into nothing: it became paid-up, because a policy acquires paid-up value once at least two full years' premiums have been paid and later premiums stop.
Step 2 - paid-up sum assured. (Premiums paid ÷ premiums payable) × sum assured = (4 ÷ 20) × ₹5,00,000 = ₹1,00,000.
Step 3 - vested bonus. ₹42 per ₹1,000 for each year in force. Units = 5,00,000 ÷ 1,000 = 500. Bonus = 42 × 500 × 4 years = ₹84,000.
Step 4 - final additional bonus. Nil. It is payable only where the policy runs 15 years or more and is in full force; this policy is paid-up, so the ₹60 rate does not apply.
Total payable = ₹1,00,000 + ₹84,000 = ₹1,84,000.
Why not the other figures: ₹5,00,000 is payable only while the policy is in full force with all premiums paid; ₹92,000 is the agent's revival quotation, not a benefit - it is not even equal to the arrears, which are 4 × ₹27,600 = ₹1,10,400 before interest. The widow should also be told that no loan was taken, so there is no deduction.
2. Could the policy have been revived instead? Evaluate the revival position and the agent's ₹92,000 offer.
Read the worked answer
Window: revival is normally permitted within five years from the due date of the first unpaid premium. The first unpaid premium fell due on 15 March 2023, so revival was possible up to about 15 March 2028 - Deepak died inside that window.
But revival is not a matter of paying money:
- It requires the life assured to be alive and to sign a fresh declaration of health, with medical evidence if called for. Once the life assured has died, revival is legally impossible - the risk has already attached and there is no one who can make the declaration.
- It requires all arrears - here 4 × ₹27,600 = ₹1,10,400 - plus interest at the rate prescribed by the Corporation on the date of revival, and the Corporation's acceptance.
- The insurer may decline revival or impose terms, so an agent's assurance is not a guarantee.
The ₹92,000 letter: it is less than the bare arrears, so it could never have revived the policy as written; the agent appears to have misquoted. It gives the widow no enforceable right and should be escalated as a conduct issue, because it may have led the family to believe the policy was protected. Handle the claim on paid-up value, and explain the position to her sympathetically in writing.
3. What documents and legal checks govern this claim, and what are the consequences if the settlement is delayed?
Read the worked answer
Documents: the completed claim form, the original policy document, the certified death certificate, and the nominee's identity and bank details. Nothing else is needed - no minor's certificate, no guardianship proof, no affidavit of heirs, because the nominee is an adult and named on the policy. Demanding extra documents is the commonest cause of avoidable delay.
Legal checks:
- Nomination: the widow is the recorded nominee, so the Corporation discharges its liability by paying her; she holds the money free of the other heirs' claims in her capacity as nominee.
- Section 45: the policy was issued in 2019 and the death is in 2027, well beyond three years. The claim cannot be called into question for misstatement unless the insurer proves knowing and intentional suppression with intent to defraud. An accident claim also raises no obvious causation issue.
- No loan: no deduction from the paid-up value and bonus.
Delay: the claim must be settled within 30 days of the last necessary document (45 days where an investigation is required). Beyond that, interest at 2% above the bank rate is payable. Recommend the branch settle at ₹1,84,000 promptly rather than invite interest and an Ombudsman complaint.