Covid-orphaned kids: How to claim life insurance proceeds?

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Amid various medical and economic battles being fought to overcome the brutal impact of Covid-19 pandemic, little do we realise about the trauma children have gone through for over two years now. As many as 30,000 children across the country have lost one or both parents due to the disease so far, according to the National Commission for Protection of Child Rights (NCPCR) in India.

A total of 30,071 children were orphaned, lost a parent, or abandoned mostly due to the Covid-19 pandemic, according to the data submitted by different states till June 5, the NCPCR informed Supreme Court last month. Of the total, 26,176 children have lost a parent, 3,621 have been orphaned and 274 have been abandoned.

While there is enough institutional framework in place to take care of such children, governments prefer transferring custody of orphaned kids to close relatives rather than orphanages. It’s often observed that grandparents or other close relatives come forward to accept the guardianship of kids when both parents die as in the case of the current pandemic. But what about the life insurance claims of deceased parents?

Claim settlement for Covid-orphaned kids

Usually, the claim settlement process begins after the policyholders’ surviving spouses reach out to the life insurer. But in cases like those of Covid-orphaned kids, the title will become open for a claim. What is the discourse ahead?

The official petition for guardianship has to be submitted to the court under Hindu Minor & Guardianship Act for the appointment of Guardian. After receiving the court order, the guardian can approach the insurance company for settlement of the claim. The parents’ death certificate must also be produced both in the court of law and to the insurance company.

“Normally life insurance claims need the original policy document. If both parents have expired, the bank will not permit anyone to open the locker till a Succession Certificate is produced. Therefore one has to go to court for issuance of the certificate. Often, the original policy documents are kept in bank lockers. Thus, this certificate is an important document. This can be issued to a major child or grandparents and relatives. Closer the relation, the better it is,” SK Sethi, founder and director at Ria Insurance Broker, said.

Sethi further advised that an intimation about the death of the parents must be given to the insurance company along with the fact that a court petition is in progress and suitable order will be submitted in due course of time. This is done to avoid any fraud claim on the insurance amount.

Documents required 

Apart from succession certificate/guardianship, death certificate of the parents and original policy documents, insurance companies will also demand photographs, Aadhaar Card and PAN Card of the deceased.

“The documents required for processing of open title claim include a copy of death certificate of the life assured and nominee, claim intimation form filled and signed by a guardian, copy of identification and address proof of guardian and kids and copy of bank passbook of legal guardian / sole Ac of minor kids. All medical documents related to the death of policyholder and nominee must also be produced. Indemnity bond executed by a guardian is another key document required,” Atri Chakraborty, COO at IndiaFirst Life Insurance Company said.

How to avoid misuse of funds?

Once the claim funds are released, its end-use has little to do with the insurance company.

“Once the claim is settled in favor of Legal Guardian basis the legal guardian certificate, the life insurance company does not have any control over how the same is managed by the legal guardian. A legal guardian is obliged to carry out his/her responsibility as the law permits. After payment of such claim amount, the life insurance company is discharged from all its liabilities under the policy,” Chakraborty asserted.

The court order on guardianship will have some conditions imposed to protect the rights of children. For example, putting the amount from the insurance policy into a fixed deposit and only interest to be used for taking care of children till they turn adults (18 years).

The amended Insurance Act, 2015 has created a new category known as ‘beneficial nominees’. In case the parents, spouse or children of the policyholder are nominated in the policy, their rights will supersede that of legal heirs, making the process smoother.

Meanwhile, in recent months many webinars have been conducted on the importance of Will creation where new clauses with respect to the death of both partners have been added. Sethi feels, “Why should you stop the Will at your spouse level? Think of the future and try taking few steps further.”