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Should Missing Person Insurance Payouts Take 7 Years? Research Team | Posted On Saturday, May 18,2019, 05:18 PM

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Should Missing Person Insurance Payouts Take 7 Years?



Take a look at this fact, Insurers wait for 7 years before settling death claims for missing people. Don’t you think this is a long time? Life Insurers store death claims filed by the family members of a missing person in their system, after a police complaint has been filed. Life Insurers have the seven-year rule for a missing person, to determine the cause of death.

Life insurers do make a concession. There’s a waiver for death in natural calamities like flash floods, earthquake, cyclones or landslides. Life Insurance Corporation or LIC, India’s largest life insurer, settled claims of victims of the floods in Tamil Nadu and Puducherry in 2015, on the same day. For the victims of the Uttarakhand disaster in 2013, LIC relaxed the normal seven-year waiting period for missing persons.

Why are life insurers strict with the seven-year rule? Life Insurers don’t want to pay for fraudulent claims when a person is still alive. They lose almost Rs 3,000 Crores each year to these frauds. They want to be doubly sure, before they settle the claim.

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Should Missing Person Insurance Payouts Take 7 Years?​

What is Presumption of Death?

Presumption of death is an assumption that a person is dead as he/she has unexpectedly disappeared or has been continuously absent for a time period of 7 years.

The life insurer insists you submit the death certificate of the insured, along with some other documents to the insurer for claim settlement. For missing people, this can’t be done. Presumption of death is made 7 years from the date, the person has been missing. (Date of filing FIR).

SEE ALSO: What is a Term Life Insurance Policy?

Why Reduce the Seven-Year Missing Person Rule?

Waiting for seven years defeats the purpose of availing term life insurance. The person might be dead, but his family suffers emotionally and financially as he is declared missing. This is the breadwinner missing. His family needs the death benefit/sum assured to meet daily expenses, for children to get a good education and loans like home loans to be paid back.

If the insured/policyholder is missing in a natural calamity, the nominee has to wait a long 7 years, before he gets the death benefit.

Life insurers must reduce the seven-year rule to a three year waiting period. Fraudsters are out to make a quick buck. They will not wait for 3 years to get the claims settled. Family members of the missing policyholder need the money badly. If they get the death benefit from the term life insurance plan in three years instead of seven years, it would make a big difference in their lives.

How Does the Insurer Pay the Claim for Missing Persons?

The court releases an order to the insurer. This is seven years after the policyholder has been missing. The insurer then goes ahead with the claim procedure and the claim is released. There’s one condition; the nominee/beneficiary must pay the premiums regularly for 7 years. This is necessary to keep the life insurance policy active.

A family member of the nominee files an FIR for the missing policyholder. The date of the FIR is considered to be the date when the insured person was deemed to be missing. The nominee has to wait for 7 years and then submit the requisite documents to the life insurer.

  • The copy of the FIR and missing person report which has been filed with the police.
  • Non-traceable report which has been issued by the police.
  • Court order which presumes the insured as dead after a lapse of seven years.
  • The original policy documents or the indemnity bond.

SEE ALSO: Term Life Insurance - A Necessity Or A Fad?

Is There a Chance of Escaping From the Seven-Year Rule?

Let’s consider a case where there’s a terrorist attack or a natural calamity. The Government releases a list of missing people presumed dead in a plane crash, floods or an earthquake. The insurers take these cases into consideration, and over-ride the seven-year clause to settle the claim quickly.

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