When policyholder goes missing… :: Business Line

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There are situations when a person is unheard of for several years. What happens to such a person's life insurance policies?

Does the spouse or nominee or assignee pay the premiums and keep the missing person's life policy in force?

It is common knowledge that if premiums are not paid within the days of grace, a life insurance policy lapses and most of the benefits are not available on a lapsed policy.

Many policyholders, on change of their residence, inform the same to their friends, bankers, cooking gas agencies, but forget to communicate it to life insurers. In the same way, experience tells us that the case of a missing policyholder is not informed to the life insurance company till that time when any benefit is due under the policy.

PRESUMPTION OF LAW

The law in our country allows for a presumption – a presumption of death – in case of missing persons. If a person is unheard of for a period of seven years, he is presumed to have died and the onus of proving that he was alive within this period is on that person who affirms that he was alive. There is no presumption as to the date and time of death.A court has to order the presumption of death. The date of death of the policyholder (life assured - missing person) could be taken as the date of the order or it could be even the date of filing the suit. It cannot be taken backwards beyond this date.

When a death is presumed by order of court, there arises a death claim on the policy, provided that, the life insurance policy was kept alive paying all premiums that had fallen due. When an intimation is given to the insurer about the missing of the policyholder, the life insurer generally advises the nominee/spouse (whoever sends the intimation) to pay premiums and keep the policy in force. It is in the best interest of the beneficiary to continue to pay the premiums till the decision of the court is obtained. The conventional life insurance policies offer mainly three types of claims, viz., (a) the survival benefit claims (known as SB claims) that become payable on the continued survival of the life assured for a specified number of years since commencement of the policy, (b) maturity claim and (c) the death claim. All these are affected by the missing of the life assured. So is the position in an annuity policy. If death benefit is available in the policy, the situation is similar to that in a conventional policy. But if the annuity instalments have commenced and where an annual existence certificate is to be produced to the insurer, problems could crop up as no existence certificate can be produced. Moreover, in those annuity cases where the option of return of capital (ROC) was chosen by the annuitant, the nominee cannot get the capital/purchase price back or annuity for the remaining period (in case of annuity certain) unless death is established.

Spouses or other beneficiaries of life policies where the life assured is missing may take care of the following:

Report the matter of missing of the life assured, in writing, to the life insurance company also, after they inform the same to the police authorities

Continue to pay all premiums that are due and keep the policy in force, and

Apply to the court for an order of presumption of death of the life assured when a period of seven years has elapsed since he/she was last seen. When the court issues an order of presumption of death, a death claim can be submitted to the life insurance company. If, during the seven intervening years, any SB claims have fallen due on the policy or if the maturity claim has fallen due on it, the court's order will enable the insurance company to settle all those claims too.