Insurance Claims: Types, Procedures & Settlement Explained

Published on 16 September 2025 by
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The claim process is the most important stage in the lifecycle of an insurance policy. While selling a policy builds customer relationships, claims are the stage where trust is tested. A claim is the moment of truth when the insurer fulfills its promise to provide financial protection against risk. For LIC AAO aspirants, learning about claims is critical because it combines legal, regulatory, and customer-service aspects of the insurance business.

What is a Claim in Insurance?

A claim in insurance refers to the formal request made by a policyholder, nominee, or beneficiary to the insurer, asking for compensation or benefit as per the terms of the insurance contract. A claim may involve payment of money (like a death claim in life insurance or hospitalization expenses in health insurance) or providing a service (like cashless treatment at a hospital).

In simple terms, claims bring the insurance contract into action. They are not just financial transactions but also a test of the insurer’s credibility, efficiency, and adherence to regulations.

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Importance of Claims in Insurance

The claim function is central to the insurance business. Its importance can be explained as follows:

  • Contractual Obligation: Claims are the legal duty of the insurer under the policy terms.
  • Reputation & Trust: Quick and fair settlement creates customer confidence and loyalty.
  • Regulatory Compliance: IRDAI mandates strict timelines and transparency in claims.
  • Financial Balance: Efficient claim management prevents excessive payouts and ensures solvency.
  • Customer Experience: For most customers, their perception of an insurer depends entirely on how their claim is handled.

Types of Claims in Insurance

Insurance claims vary depending on the type of insurance. Broadly, they are divided into life insurance claims and general insurance claims.

Life Insurance Claims

  1. Death Claim
    • Raised by the nominee/legal heir when the insured person dies during the policy term.
    • Requires submission of documents like death certificate, policy bond, claim form, and medical records.
  2. Maturity Claim
    • Payable to the policyholder when the policy term ends.
    • Common in endowment or whole-life plans where survival benefits are assured.
  3. Survival Benefit Claim
    • Applicable in money-back policies where benefits are released at regular intervals.
  4. Rider Claim
    • Arises when a rider (such as critical illness, disability, or accident rider) is triggered.

General Insurance Claims

  1. Health Insurance Claim
    • Can be cashless (direct settlement with hospital) or reimbursement (customer pays first, then gets reimbursed).
  2. Motor Insurance Claim
    • Covers damages to own vehicle, theft, or third-party liability. Requires surveyor’s inspection and accident reports.
  3. Property/Fire Insurance Claim
    • Arises when property is damaged due to fire, burglary, natural calamities, etc.
  4. Marine Insurance Claim
    • Compensates for loss or damage to goods in transit by sea, air, or land.
  5. Liability Insurance Claim
    • Arises when an insured person or company is legally liable for causing harm or damage to a third party.
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Claim Procedure in Insurance

The procedure for claim settlement in India usually follows these steps, though details may vary by product:

  1. Claim Intimation
    • The insured/nominee informs the insurer about the claim event. This can be done online, at a branch, or via customer care.
  2. Filling Claim Form
    • The claimant fills out the official claim form with necessary details.
  3. Submission of Documents
    • Documents like policy bond, medical certificates, discharge summary, FIR (in accident cases), or death certificate are submitted.
  4. Appointment of Surveyor/Investigator (if required)
    • For general insurance claims (like fire or motor), a surveyor assesses the loss. In life claims, investigations may be conducted for early claims or suspicious cases.
  5. Verification and Evaluation
    • Insurer verifies authenticity of documents, evaluates claim validity, and checks compliance with policy terms.
  6. Decision and Settlement
    • If found valid, the insurer releases payment directly to the claimant’s bank account or to the hospital (in case of cashless claims).
    • If rejected, written reasons must be communicated within the regulatory timeline.

Regulatory Guidelines for Claim Settlement in India

  • IRDAI Guidelines mandate settlement of life insurance claims within 30 days of receiving all documents.
  • In case of investigation, it must be completed within 90 days, and the claim settled within 120 days.
  • For health insurance, cashless claims must be authorized within a few hours of hospitalization.
  • Any delay beyond timelines attracts interest payments to the claimant.

Challenges in Claim Settlement

  • Non-disclosure of facts by customers at the time of policy purchase.
  • Submission of incomplete or forged documents.
  • Disputes between nominees and legal heirs.
  • Fraudulent claims leading to financial losses for insurers.
  • Managing large-scale claims during natural disasters.

Practical Importance of Claims in Insurance

The claims department is often called the “face” of an insurance company. While marketing attracts customers, claims ensure retention. A company with a strong claim settlement record, like LIC, enjoys trust and loyalty from millions of policyholders. Efficient claim handling not only reduces disputes but also strengthens the company’s financial discipline.

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Why LIC AAO Aspirants Must Learn Claims

For LIC AAO aspirants, understanding claims is vital because:

  • Claims are directly linked to their future roles in customer service.
  • They will deal with policyholders, nominees, and internal claim teams.
  • Knowledge of claim procedures ensures they guide customers correctly.
  • Claim management is a key part of both the exam syllabus and on-the-job responsibilities.

Key Takeaways

  • A claim is a formal request for insurance benefits.
  • Life claims include death, maturity, survival, and riders.
  • General claims include health, motor, fire, marine, and liability.
  • Claim procedure involves intimation, documentation, verification, and settlement.
  • IRDAI regulates timelines and ensures fairness in claim settlement.
  • LIC AAO aspirants must master claim concepts for exam success and practical work.

FAQs

Q1. What are the different types of insurance claims?
 There are mainly two types of insurance claims – maturity claims (when the policy term ends) and death claims (in case of the policyholder’s demise). Additionally, there are rider claims for extra benefits and health/accident claims under specific covers.

Q2. What documents are required for filing an insurance claim?
 The documents vary depending on the claim type, but generally include the policy document, claim form, identity proof, hospital/medical reports, death certificate (for death claims), and bank details for settlement.

Q3. How much time does it take to settle an insurance claim?
 According to IRDAI guidelines, insurance companies must settle claims within 30 days of receiving all required documents. In cases where further investigation is needed, the timeline may extend up to 90 days.

Q4. What is the procedure to file a death claim in life insurance?
 The nominee must inform the insurance company immediately, submit the death claim form, death certificate, policy documents, and identity proof. After verification, the insurer releases the settlement amount to the nominee.

Q5. Why can an insurance claim get rejected?
 Claims are usually rejected due to non-disclosure of facts, delay in intimation, policy lapse, submission of incomplete or false documents, or if the claim falls outside policy coverage.