How to Trace Unclaimed Life Insurance Benefits?

Life insurance companies have meticulous procedures in place to guarantee timely and smooth payment of the multiple advantages. However, did you think what happens when the policyholder does not claim an advantage when it is due? Or a situation in which the insurance company is not in a position to pay the advantages as the policyholder is reachable / untraceable, or rather a case in which the insurance company has not been notified of the life insured’s death.

These may look like isolated incidents; however, you would be surprised to know that Rs 15,166.47 crore was unclaimed with 23 life insurers as of March 31, 2018, according to official data. Of this, Rs 10,509 crore was with India’s Life Insurance Corporation (LIC), and Rs 4,657.45 crore was with private insurance firms. Compared to this, the unclaimed quantity for the whole sector was Rs 4,865.81 crore for the year 2012-13. This is an annual 25 percent rise in unclaimed money from policyholders over the previous five years.

What Is The Meaning of Unclaimed Benefits?

The following benefits typically include unclaimed benefits:

• Maturity benefit
• Money-back proceeds/Survival benefit
• Death claim proceeds
• Excess premium which has not been refunded
• Refund of the amount which is not deposited in the policy

Any amount not claimed for more than six months after the due date of the reimbursement is referred to as unclaimed benefit.

What Are The Reasons For The High Number of Unclaimed Benefits?

Some of the major reasons are:

1. Changes in The Mailing Address And Contact Details: Many insurance companies do not keep them informed of changes in their contact information. The insurance undertaking therefore loses track of these customers. Life insurance is a long-term agreement and, if the advantages fall due, the policy officer may also not attend a business. The business is finding such clients highly hard and has to wait until the client has its advantages.
2. Poor Documentation on The Part of The Policyholder: The insurance company sends periodic intimations to the policyholder through premium due alerts, premium receipts, etc. that assist maintain the policy fresh in the policyholder’s mind until the policy is within the premium payment period. However, once the premium payment period is over, the insurance  company’s communication and alerts drastically decrease, and individuals who are very busy or dabble in various economic products and do not maintain adequate paperwork may simply lose track of the policy’s existence. This, coupled with changes in contact details, can make it very difficult for the insurance company to locate the policyholder and pay his dues until the policyholder or his nominee can claim the dues.

   This scenario can occur mostly in single premium and short pay policies where, after the premium payment period is over, the policy continues for a significant period of time.

3. Not Keeping The Nominee/Family Informed About The Policy:

   The purchase of a life insurance policy involves a lot of planning and study. However, the purchase of the ideal scheme does not end your obligation. You must also educate your nominee about the policy and where the policy papers are retained so that they can claim it if the need comes otherwise the whole aim of purchasing life insurance will be defeated.

There are instances where the policyholder took a life insurance policy to protect his family financially in the event of his untimely death but did not inform his nominee or family members of the life insurance policy because there is a natural tendency to believe that nothing can happen to us or because of family disputes / suspicions / conflicts. In the event of such a policyholder’s sudden demise, the nominee or family members will not be able to make a claim because they are unaware of such a policy being in place.

What Steps Insurance Companies Are Taking To Reduce Unclaimed Benefits?

IRDAI has instructed all insurance companies to pay any amounts in excess of Rs 10,000/- only through the Electronic Clearing Service (ECS) or through NEFT / RTGS directly to the bank account of the policyholder. In addition, for those policies that came into effect after 2014, insurance companies are required to record bank information at policy issuance itself and create an electronic transfer of funds.

Pension funds also made a major contribution to the unclaimed fund issue. Many pension policies had resources that were not enough to buy the annuity. Vide its circular dated August 3, 2018, IRDAI relaxed the rules on pension products and allowed policyholders to withdraw the accumulated amount completely if it was not sufficient to purchase the minimum annuity in accordance with the annuity rules.  The circular mentioned that with the insurance companies this was one of the reasons for unclaimed money.

How Can You Trace Unclaimed Insurance Benefits?

Unclaimed benefits details are posted on the insurance companies ‘ website. You can identify the policy by entering a few policyholder information such as name, date of birth, PAN number (optional) or policy number (optional). Insurance companies must update on a semi-annual basis data about unclaimed quantities on their websites.

If the website of the insurance company displays an unclaimed amount against a policy, the policyholder or beneficiary may contact the company with the policy document and details of Know Your Customer (KYC). To prevent fraud, the insurance company may look for additional documents / verification.

What Happens If The Amount Is Not Claimed By The Policyholder or His Nominees?

India’s government launched the Senior Citizens ‘ Welfare Fund Act, 2015 (SCWF), as part of the Finance Act 2015. In accordance with current rules, the amount must be transferred to the Senior Citizens ‘ Welfare Fund (SCWF) by all insurance companies that have unclaimed amounts of policyholders for a period greater than 10 years. The purpose of this fund is to promote our senior citizens ‘ welfare.

In addition, as per IRDAI, policyholders or their beneficiaries will be eligible to claim their policy dues up to 25 years from the date the insurance company is transferred to SCWF. However, if no claimant has been transferred to the SCWF for a period of up to 25 years, such amounts shall escheat to the Central Government in accordance with Section 126 of the Finance Act, 2015. After that, the policyholder or recipients can not claim the dues.

Conclusion

Unclaimed benefits can be substantially reduced if the policyholder updates any changes in his contact details to the insurance company and keeps the nominee or family informed of the policy. Buying a strategy is often seen as an activity that finishes with the issuance of a policy.Keeping your loved ones informed about the policy, appropriate paperwork and maintaining the insurance business up-to-date on your recent contact information will assist you / your nominee appreciate the policy’s advantages when granted.

To know more about Mutual Fund, you can visit our website http://www.jayantharde.com or contact our representative at +91 712 2282029 or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.