Group Term Insurance Claim Settlement Process

Group term insurance usually refers to the term life insurance plan offered to members. Companies take group term insurance plans to cover their employees under a single policy. The policy is designed to provide financial compensation to the family of the nominee of the insured employee in case of his/her untimely death.

The group term insurance claim settlement process is almost similar to the term insurance claim settlement process except that here, the employer would be involved to expedite the claim settlement process in addition to the other members involved. In general, there would be involvement from the insured policyholder, insurance company, and intermediary for the claim settlement process.

The life insurance claim settlement process involves the coordination of all the parties involved in the process. In the case of group life insurance, the employer would be involved to increase the coordination between the interacting parties. It is important to note that the claim settlement process happens only when the insured policyholder expires during the policy period.

Group term insurance plans could also be extended by including disability coverage, in which the insured would be compensated in case of permanent total or partial disability due to an accident. However, the primary intention of a group term life insurance plan is to provide life insurance coverage to the policyholder in case of untimely death, be it due to natural causes or accidental causes.

Here is the step-by-step process of claim settlement in group term insurance policy:-

Steps involved in the claim settlement process of group term insurance policy

• Step 1:

The first step in the group term insurance claim settlement process is registering the claim with the insurance company. For example, if any of your employees meet with an untimely death, then as an employer, you are required to inform the insurance company regarding the death of the employee.

The claim can be registered by the employer, the nominee, or the policyholder’s family members. For this purpose, the insurance company requires the employer or the nominee to provide certain details regarding the event.

For instance, the cause of death, time of death, reason of death, brief description of the accident, or any other details as required to process the claim. Once the basic details are collected, the insurance company will generate a claim reference number, which can be used for future communications. The claim reference number would be unique, and it would be easy to coordinate with the insurance company.

• Step 2:

In the second step, the insurance company would ask for all the required documents to settle the claim. All the required documents are to be submitted to the insurance company without fail for the claim to be processed. Once the documents are submitted, the insurance company might appoint a surveyor to verify the claim and, in addition, verify the documents for originality.

Here is the list of documents that are to be submitted for group term insurance claim settlement:-

1. Duly filled and signed claim settlement form. The employer, nominee, or family member could complete the claim settlement form. 
2. First information report or FIR from a local police station 
3. Panchanama report from the treating hospital. 
4. Postmortem report from the treating hospital.
5. Original policy document for verification purposes. 
6. Original death certificate issued by local municipal authorities. 
7. Nominee identification details include passport photo, KYC documents, relationship with the policy holder, etc.
8. Cause of death – Natural or accidental 
9. Medical records or hospital records from the treating hospital. 
10. Neft details for claim payment. 
11. The employee’s employment details include the employee number, date of joining, and other required details.

• Step 3:

After verifying documents, insurance companies may contest the claim if they think fraud or misrepresentation is involved. The contestability period in life insurance is 2 years from the date of taking the policy.

If a claim arises within the contestability period, the insurance companies may contest the claim in case of fraud and misrepresentation. Once the documents are verified, insurance companies might request additional documents depending on the type of claim. Additional documents could be health-related documents such as previous health history, etc.

After verifying all the details, the insurance company would settle the claim by depositing the claim amount in either the employee’s or the employer’s bank account. If the amount is shared with the employer, it can be shared with the nominee or family members of the employee.

This is the basic claim settlement process in a group term insurance plan. All the claims in the group term insurance policy would be coordinated by the employer, which is an advance to the nominees of the employees.

Nominees who need to be educated or made aware of the life insurance policy would receive a great deal of assistance from the insurance company as the employer would submit the employment-related documents.

The nominee or family members of the deceased policyholder should submit other documents such as a death certificate, FIR, etc. Coordination could be a challenge in the case of life insurance plans as the policyholder would not be available at the time of claim settlement, and the family members may need to be made aware of the intricacies of the claim settlement process.

The claim amount under group term life insurance is usually paid as a lump sum and the nominees or family members should be in a stage to manage the amount. If the family members are not educated enough to invest in the proceedings properly, they should contact a financial advisor and decide on the investment.

Nominees could use the amount to either clear their loans or invest it to get regular returns, which could be used to maintain their regular lifestyle. Individual term insurance plans can provide the claim amount as regular income for a certain period of time in addition to the lump sum option.

The mode of claim payout can be selected by the insured when taking the life insurance policy.
For more details on the group term life insurance claim settlement process, please get in touch with our life insurance experts at Ethika Insurance.