Life Insurance: The purpose of life insurance is not just to accumulate money, but it is the strongest shield for your family’s financial security. Especially plans like term insurance, in which the sum assured is large, prove to be a guarantee for the family’s future. But often people have this question in their mind that if the premium is paid continuously for three years, can the insurance company still refuse to give the claim?
Importance of Insurance Law and Section 45
The answer to this question is found in Section 45 of the Insurance Law (Amendment) Act 2015. According to this section, if a life insurance policy has been in force for three consecutive years, then after that, the insurance company cannot challenge it on any basis. This provision came into force after the amendment to the Insurance Act 1938.
When does the counting of three years start
This period starts from the date of issue of the policy, the date of commencement of risk, the date of reinstatement of the policy, or the date of addition of a new rider. Whichever date is the latest, that is considered the basis. This period is called the Contestability Period.
Why are the first three years important?
The highest risk of claim rejection is in the first three years. During this time, if the insurance company feels that the policyholder had given wrong information or some facts were hidden, then the company can investigate and reject the claim if required. In this situation, if fraud is proved, the premium can also be confiscated. At the same time, if the wrong information is not given intentionally and fraud is not proved, then the premium can be refunded.
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What happens after the completion of three years
After the completion of three years, the insurance company does not have the right to challenge the policy. Even if the information is given wrongly or any fact is hidden, the company cannot reject the claim. The claim can only be denied if the company can prove that the fraud was intentional, which is legally very difficult.