Policyholders must keep their families informed about the investments they make
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Unclaimed funds remain with the insurance provider until rightful beneficiaries or policyholders initiate a claim.
A life insurance policy sold through an agent has a higher unclaimed fund rate than one sold through another channel like bancassurance or a digital platform, Business Standard reported recently.
“Unclaimed life insurance funds are the unclaimed death or survival benefits from policies,” says Tarun Mathur, co-founder and chief business officer, Policybazaar.com. Such funds are proceeds of insurance policies, including death or survival benefits, not claimed by the beneficiary or the policyholder.
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Life insurance funds go unclaimed for several reasons and knowing them is important
Lack of awareness, and missing information: If a policyholder does not communicate details to beneficiaries it can hinder making a claim. Policyholders should update their mobile number, email address, bank details, and address with the insurer to stay informed about policy events. “Updating beneficiaries’ contact details is also crucial for the insurer to identify rightful beneficiaries in case of unforeseen events,” says Mathur.
“Apart from this, sometimes the policy has a beneficiary who has already passed away. Or sometimes, there is no beneficiary mentioned at all,” says Naval Goel, chief executive officer (CEO) of PolicyX.
Forgotten policies: People with multiple life insurance policies may forget those purchased years ago or for small sums. Goel says, “Usually, except for term insurance, life insurance policies are for the long term. The coverage extends up to 100 years. So, sometimes the policyholder himself forgets about a particular policy if he has more than one.”
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Know Your Customer (KYC) updates: If the policyholder or beneficiary fails to provide the necessary KYC, documents, or bank details, policyholders or beneficiaries cannot claim policy benefits.
Not submitting claims: Policyholders must initiate the claims process when there is a need. “A significant portion of unclaimed funds arises from policyholders failing to submit maturity claims, death claims, or claims that are deemed non-payable due to disputes or other reasons,” says Gagandeep Singh, senior president and Head of Health, Life PoSP vertical, PolicyBoss.com.
Communication: In some cases, policyholders cannot be contacted. Singh says, “These may include changes in address or contact details, the life insured getting married and becoming difficult to trace due to a lack of information, relocation to a different place or abroad, or a change in status to non-resident Indian (NRI).”
Death claims: Unclaimed funds can also occur in death claims when there are discrepancies in the title, such as the nomination not being filled out or updated with the insurer. Singh says, “Additionally, situations may arise where the nominated beneficiary has passed away before the policy matures, leading to complications in claim settlement.”
Business insurance: In the case of business insurance policies, unclaimed funds can result from partner disputes or the dissolution of partnerships and companies. Singh says, “Disputes may arise between keyman’s insurance policies where employers or proposers refuse to pay, causing delays in claim settlement.”
How are funds parked
Unclaimed funds remain with the insurance provider until rightful beneficiaries or policyholders initiate a claim. Mathur says, “Insurance providers actively try to locate and notify beneficiaries through letters, phone calls, and all other means of communication. If no response is received within 12 months, the amount is classified as unclaimed.”
Unclaimed funds are invested in various market-linked funds by the life insurance company. The same happens with these unclaimed funds. “When the policyholders or the nominees reach out, the companies provide them the due death or maturity benefit. If these funds remain unclaimed for 10 years, the insurers transfer them to the Senior Citizen Welfare Fund,” says Goel.
How to check unclaimed funds
Policyholders or beneficiaries must consult financial advisors and contact the insurance provider for assistance in finding and claiming funds. Mathur says, “Many insurance companies offer online portals where policyholders can log in to check unclaimed funds. Even the customer support department of your insurance provider can guide you to check for unclaimed funds.”
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They can visit a branch of the insurer along with the policy details and their details. The insurers usually ask for your bank details and KYC documents while claiming the unclaimed funds. “If the beneficiaries are reaching out for the death benefit, their identity proofs, policy documents, and proof of relationship with the deceased will be asked for,” says Goel.
Preventing unclaimed funds
Policyholders must maintain records of all their policies. The family must be kept in the loop. Singh says, “This would mean sharing policy details, contact information, and instructions for filing claims. By involving family members in the knowledge of policies, the risk of funds going unclaimed due to a lack of awareness or information is significantly reduced.”
Regularly review your policy: That is another preventive measure against unclaimed funds. Singh says, “It is highly recommended that individuals review their policies periodically to assess their changing needs, update beneficiary information, and ensure that their policies remain active and relevant. Regular reviews help policyholders stay informed about their coverage and minimize the risk of funds being left unclaimed.”
Insurers send reminders, about the importance of timely claim submissions. Do not ignore any SMS or message from them, thinking it’s a marketing initiative. Singh says, “Today, insurance companies have invested in digital platforms and technologies to make the claims process more efficient and user-friendly. A lot of insurance companies have started providing online claim submission options, automating claim settlement procedures, and minimizing paperwork to facilitate faster and smoother claims processing.”
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