Viral Infection is Not a Material Fact in Life Insurance and here is another case of how an insurance claim was settled so late in the day. It so happened that in 1992 and 1994, husband of a certain Mrs Surekha Mankar took two life insurance policies from LIC. In 1995, the husband had a heart attack and passed away.
Surekha later filed for a claim with the insurance company as she was the nominee on both these policies.
LIC ended up rejecting the claim in 1996. LIC based their argument on the fact that the husband had suffered from something called “herpes zoster” when he was filling up the life insurance application form but did not mention it and so this amounted to suppression of material facts.
Viral Infection is Not a Material Fact in Life Insurance – LIC was wrong
“Herpse Zoster” according to Wiki is a viral disease characterized by a painful skin rash with blisters in a limited area on one side of the body, often in a stripe.
Surekha argued that this was a curable viral infection which need not be mentioned while taking life insurance and so it did not amount to suppression of any facts but the claim was still repudiated.
When this was argued in the local district forum, the forum ruled in favour of Surekha saying that this disease did not have any link with the heart attack which had caused the death of the husband. It asked LIC to pay the claim along with interest.
But as often happens in these matters, the company took it to the state commission in 1999. This was dismissed and LIC then filed a petition in the National Commission in 2007. After hearing both sides, the commission stated that Herpes Zoster is a viral infection like other viral diseases and is very much curable.
The National Commission ruled that while filling up the life insurance proposal form, it is not necessary that the person has to fill up all incidents of viral infections since these are very frequent in nature and very much curable. It thus concluded that this was not a case of suppression of any facts.
My observation – Viral Infection is Not a Material Fact in Life Insurance
I have earlier argued that your life insurance company might not pay your death claim. This is an example of that. The solution is to actually document every single instance of a disease or infection which went on for some days. It is not possible to document every single instance in your life when you took a medicine.
Viral Infection is Not a Material Fact in Life Insurance, the idea is to bring to the notice of life insurance underwriters those cases which could be significant in nature to the decision making process of whether giving out a cover to you is worth the risk for the insurance company.
If in doubt, it is always wiser to document the scenario.
Needless to say, all hospitalizations need to be necessarily mentioned in the insurance proposal form. You will notice that the space provided to jot these down in the form is very small. Use a separate paper and write things down in detail if required.
Ask the insurance company to return this paper along with the xerox of the original application form, if it provides the cover to you. This will ensure that the proof is at your end also.
Hey that’s a good (real) case study. I really pity Mrs Surekha Mankar who had to go through so many legal intricacies after suffering from her husband’s death. 🙁
I had heard that LIC was the least in declining claims among ALL the insurance companies in India.
Nevertheless, I will always mention any critical disease (if any) in the insurance form and will also suggest the same to my closed ones.
Thanks Radhey for sharing such vital info & keeping us abreast with the dos & donts in financial matters. 🙂
@Sudip D, LIC has the least claim rejection ratio, but all biggies make mistake one time or the other.
Also, it is not that on purpose most of the insurance companies will go for rejections – when they see a valid cause, they will reject.
What is scary in this case is that the investor had to wait from 1995, the year of death till 2011 for the resolution to be passed. Though interest will be paid for these many years, I wonder what use the money might be for the lady now. Maybe she needed it more during these years.
@Radhey Sharma, Yeah, you are right in the sense that it’s always better to be late than never. Hopefully the lessons learned from this would be useful for all of us. At least we now know that we can fight it out even with biggies like LIC.
I wish to take a term life insurance policy. Do I need to mention to the new insurance copmany the fact the LIC of India has refunded my term insurance amount within the previous year citing reason as “non compliance of requirement”. Does this mean Decline from LIC of India. Please suggest me remedy and affects of writing this fact in my insurance proposal form or not.
@Sandeep,
I think you should disclose this information. In future if the company comes to know about this they can use this base to reject your claim.
Lets wait what our expert’s say?
@sandeep,
You need to mention this with adequate data so that the new company can take it in the right information and not reject information to you. Don’t hide it.
@Radhey Sharma, Can you please tell why this information needs to be declared Radhey? I thought only information related to your existing policies or any claims made should be declared. Isn’t it being too honest? Is it really required?
@Vivek K, IT is asked in the form itself to list policies which were denied to accepted with higher premiums.
@Radhey Sharma, Ah ok, there is no escape then. If it is asked in the form then a person must declare. Thanks Radhey.
@Vivek,
Even when i took online term plan from Aviva i disclosed all my previous policies which i cancelled.
@Rakesh, I hope being too honest doesn’t turn out to be a disadvantage.
@Vivek,
Even i thought so when i entered the information. They asked me many times the reason for cancellation and every time i mentioned that poor customer service. I also told them if i don’t get prompt service from you guys then i won’t renew this policy either.
Hi Radhey,
Thanks for the nice article. I have taken online term plan 2 years ago and i have not disclosed few of my previous ulips details somehow. Now i am worried that my claim may get rejected in future because of this. So shall i cancel this online term plan and take another term insurance from different insurer.
Thank you.