You may often find yourself paying for insurance premiums every month or on a yearly basis. It could be for your Term Insurance, Health Insurance, Car Insurance or even your Home Insurance. And if you happen to skip or miss one of these payments you are sent a prompt reminder. Isn’t it? But, have you ever wondered what happens when you don’t claim your insurance money? Well, let’s find out!
Some time back, the Press Trust of India (PTI) conducted a very interesting research. They went about looking into all the money that was unclaimed by policyholders. And according to their report, insurance companies had as much as Rs 15,176 crore lying unclaimed as of March 31, 2018. Wow! That’s almost five truckloads of money, quite literally, if you convert all of it into cash. And all this money was with 23 Life Insurance companies alone. In the year 2012-13 the entire industry had Rs 4,865.81 crore of unclaimed money. This means that from 2012 up until now there has been a 25% increase annually. PTI also reported the statistics and the split up of the total unclaimed money. In the data provided by the Insurance Regulatory and Development Authority of India (IRDAI), the break-up of the total unclaimed money was something like this. Life Insurance Corporation (LIC) was withholding Rs 10,509 crore and the remainder of Rs 4,657.45 crores were lying unclaimed with 22 different private sector insurers.
Why Such Huge Numbers??
You may be wondering why this is the case. Well, there are a lot of reasons why there is such a big number attached to the total unclaimed money. Let’s get into the details of the reasons and what you can do to avoid them.
Unaware Nominees: One of the biggest reasons why a claim may not be settled is because the nominee who is supposed to receive this money is not aware that a policy exists in the first place. Many times, a policyholder may nominate a family member without the nominee’s knowledge. And often the nominee is unaware of the details of the policy. So, in case of the demise of the policyholder, the nominee will not claim the amount.
How to Avoid This: If you are a policyholder, you need to inform the nominee about the existence of your insurance policy. Share the details with the nominee with regards to where the policy document is, the claim amount and the procedure to make the claim. Also, it’s best to update your policy with the nominee name every now and then.
Contact Details Not Updated: Many a times, we forget to update our records with changes. It could be anything like a change of address, change in phone number, change in nominee details, change of amount etc. And since most claims are settled through cheques, not updating your address change may result in your family missing out on the cheque payment made from the insurer. And if you haven’t updated your phone number in their records, the insurer may not be able to contact you at all.
How to Avoid This: A great way to start is by re-looking all your policies and checking to see if there are any changes that need to be updated. Then, you need to promptly inform your insurer to update their records. If you have recently moved houses or moved to another location, inform your insurance company and follow the procedure to ensure the changes are reflected in your policy document.
Dependencies on Cheque for Funds Transfer: Even today a lot of insurance companies insist on using cheque as a medium to make payments. While there is nothing wrong with that, the problem arises when a cheque is misplaced. And since cheques can be cashed for up to only six months, that poses a great risk to the end receiver. Delays in cashing a cheque can lead to subsequent delays to a claim as well.
How to Avoid This: These days you do have an option to enrol for electronic funds transfer while taking a policy. Post 2014, a lot of insurers have initiated payments through electronic bank transfers. And they request that policyholders submit a blank cheque at the time of application. So, go ahead and enrol for an electronic claims payment option if you’re renewing your policy.
What Happens When You Don’t Make A Claim?
Well, if you were in the hope that the insurance company will come looking for the beneficiary to settle the claim amount then you are wrong. In most cases dependents must go running around to make a claim on a policy and when you don’t do it, the amount is left unclaimed. Last year in July, the IRDAI had taken the initiative and ordered all insurance companies who had unclaimed amounts of policyholders for more than ten years to transfer the same to the Senior Citizen’s Welfare Fund (SCWF) on or before March 2018. This fund is intended for the use of schemes that promote welfare of senior citizens in our country.
Whether it is insurance, fixed deposits, shares and securities or any other asset, we invest so that our life and the lives of those dependent on us are secured in times of contingencies. But for some unknown reason we keep these investments a secret or hidden from those very same people who were intended to benefit from it in case of death.
Relationships are built on trust and when we share our sentiments with the ones, we love we should include a dedicated mention of money matters so that your loved ones are aware of your plans to safeguard their interests in your absence. The idea behind penning this column was to awaken my readers to the fact that although we prudently plan for the secure future of our family through thoughtful investments, our efforts will be futile until the same is made known to them in one way or the other.
So, no matter what age you are and what investments you made, its time you had that all-important money talk with your loved ones so that this unfortunate rising contribution to the unclaimed investments fund does not happen from your savings. Remember life is too short to leave important words unsaid.
