A major concern for policyholders relates to claim management by general and life insurers. In the case of accident claims, there is no uniformity in how life and non-life insurers handle these. There have been instances when the insurance benefits were not paid by the life insurers wherein the insured died while crossing the railway track citing breach of the law as the reason for such rejection. On the other hand, non-life insurers will pay such claims confusing policyholders.
One reason for the aforementioned discrepancy is the manner in which personal accident coverage is structured. For a general insurance company, such plans are standalone policies. In comparison, life insurance companies include it as an additional rider along with the basic policy.
Personal accident policies comprise a huge business for general insurers
As personal accident policy is a huge business segment for general insurance companies, the manner in which claims are settled is different.
- Although traveling on the roof of a crowded bus is a breach of the law, if an insured die due to an accident, in this case, the claim is still paid by the general insurer
- If an individual driving on the wrong side of the road meets with an accident and dies, the claim is still paid because though not legal it is not a criminal offense
- If a person crosses the tracks dies in an accident; although this is not legal, general insurers are not very stringent in settling claims
However, the insurance claim in the aforementioned cases may be rejected if the deceased was drunk or under the influence of any addictive substance. Most insurance companies do not strictly adhere to the legality of the claim unless it is relevant to a particular case.
Crossing the road without a zebra crossing is also a breach of law. Similarly, traveling on the footboard of a train is not legal. However, insurance companies do not follow very stringent laws and often claims are paid in case of such accidents.
Life insurance claims and breach of law
The core objective behind keeping the breach of the law as one of the life insurance rejection reasons is only to ensure that individuals do not take the laws in their hands. General life insurers often are lenient to such breaches as personal accident covers are a huge business.
For life insurers, personal accident cover is an add-on rider and as per the regulatory guidelines, the sum assured under a rider cannot exceed the basic sum assured. Nonetheless, when a life insurance claim is rejected, the policyholder and his beneficiaries are the sufferers.
One way to avoid such disappointment is to thoroughly read all the terms and conditions at the time of purchasing the policy. Individuals must clearly understand the inclusions and exclusions, as the nature of every policy sold by different types of insurers varies. Therefore, individuals must compare different policies and understand the clauses before making their buying decision.