Can you claim policy amount ahead of time?

You can claim the policy amount one year ahead of maturity, on policies such as endowment and money back.

Your life insurance policy will mature for payment in a year but you wonder whether you could get the amount in your hands now as you have some urgent expenses. Well, this option is indeed available. Also called a ‘discounted claim’, insurers such as LIC offer this on specific request.

HOW IT WORKS

Say a policy will mature on August 15, 2014 and the last quarterly premium paid was in August 2013. Subsequent premiums due fall in November 2013, February 2014 and May 2014. An application for discounted claim is submitted in January 2014. The insurer will recover quarterly premium due in November 2013 with interest and that due in February and May 2014 without interest from the claim. If in the above example premiums are annual and that due in August 2013 is paid by the policyholder there is nothing to be recovered from the claim. While calculating the discounted period, a period above 15 days will be treated as a month and less than 14 days will be ignored.

The bonus pertaining to the last year of the policy will be added to the claim. Final additional bonus,loyalty additions and guaranteed additions due on the policy, subject to conditions, will also be added to the claim – i.e., full maturity value is worked out. Then discounting factor will be applied on the gross claim amount.

Discounted claim is available on paid-up policies as well.

Discounted claim, like maturity claim, is not treated as income in your hands and so not subject to income tax. The advantage in discounted claim is that the policy gets bonus etc for the year during which the policy has not run and the discounted value can earn interest from a bank, both of which may partially and fully compensate the shortfall due to discounting.

ELIGIBILITY

Discounted claim is available on LIC plans like Endowment, Money Back and Jeevan Shri, among others. However, discounted claim is not available on plans such as Pure Endowment, Double Endowment and term assurance plans like Bima Kiran, Bima Sandesh and Nav Prabhat. Jeevan Anand Plan is also not eligible for discounted claim. In all, 55 plans are eligible.

The requirements to be submitted to the life insurance company for obtaining the discounted claim are: a request letter to the life insurance company; discharge voucher pertaining to surrender value payment (and not discharge voucher pertaining to maturity claim)and; policy bond. An application for discounted claim may be submitted by an absolute assignee or life assured.



( The author is President, Society for promotion of legal and insurance awareness.)

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