Will a life insurance claim be denied if the insured died in an accident where he was the driver without a valid driver’s license or valid vehicle insurance? Thanks to a question by Ganapathy Krishnan at Facebook group, Asan Ideas for Wealth, I was able to obtain an authoritative answer to this question from the insurance ombudsman case files.
I am not one to beat around the bush. So the answer to the question is, NO, the life insurance claim will not be denied if the driver met with an accident without a valid drivers license and/or vehicle insurance.
However, if the life insurance policy had an accident insurance rider and/or if there is a separate accidental death claim, the claim will be rejected as an invalid drivers license and/or invalid vehicle insurance constitutes a breach of the Motor Vehicles Act, 1988 (and amendments there upon).
Now, let us investigate the evidence. I am fan of reading through the insurance ombudsman case files because it can so illuminative. See:
No insurer will hand life insurance claim amount on a platter!
or The Games Life Insurers play!
Of course, those posts had a negative tone as opposed to this one (wrt life insurance).
So let us explore the evidence:
Case No. LIC/332/Karnal/Sonipat/24/06
Source: http://www.gbic.co.in/LIC/deathclaim/DeathClaim-Book5.pdf
Page 36.
A person with a valid license for driving 2 and 4 wheelers (light motor vehicles) met with an accident and died while driving a tractor.
The life insurance claim was paid and the accident rider claim was denied. When the nominee appealed to the ombudsman, they upheld the decision of the insurer.
Case No. LI – 156 of 2005-06
Source: http://www.gbic.co.in/LIC/deathclaim/DeathClaim-Book4.pdf
Page 220.
A person died while driving a vehicle under the influence of alchohol. The life insurance claim was honored but the accidental death benefit was denied. The nominee went to the Ombudsman stating that the levels of alchohol was “slight”.
The ombudsman ruled that any level of intoxication is breach of section 185 of Motor Vehicles Act, 1988 (“driving by a drunken person is a punishable offence”) and sided with the insurance. The accident benefit was denied.
Case No. : IO (CHN)/ 21.07.2407/2007-08
Source: http://www.gbic.co.in/LIC/deathclaim/DeathClaim-Book8.pdf
Page: 46
A person with 3 life insurance policies met with an accident while driving a two wheeler with two other passengers. The life insurance claims were settled by the insurer but the accident riders were not.
The ombudsman gave an interesting verdict! They said prima facie, three people on a two wheeler is a breach of law and the accident claim should be denied, However,
“in a case where the accused had succumbed during the accident we need to go in-depth into the facts. Wherever there is a loss of life in an accident the police generally frame a charge of negligent or rash driving under the relevant provision of law in Indian Penal Code and if the accused succumbed to the injuries then the ‘charges’ are abated and case is treated as ‘closed’ by the competent authority. In the eyes of law no person is guilty of breach of law unless he is tried in a court and guilt is established. In fact, technical offences which have not been established in a court of law need not constitute breach of law as contemplated by the insurer for paying accident benefit unless moral turpitude is also established. In view of this legal position depriving the nominee the benefit of accident benefit appears to be wrong. The complaint was allowed”
This verdict is baffliling to say the least. The same logic can be applied to the above two cases, can it not?!
There are four lessons here
- Any breach of the motor vehicles act is not relevant to a life insurance claim. It will be honoured.
- However, accident claims will definitely be denied by the insurer (at least initially).
- The verdict depends on the Ombudsman – Chennai Centr, Mumbai Centre etc.
- We should instruct our nominees to search in the Ombudsman case files for precedents in case there is a problem with the claim. This will help us fight our case better.
Ombudsman Case Files
http://www.gbic.co.in/LIC/deathclaim/DeathClaim-Book1.pdf (Change no from 1 to 8 for a delightful read!)
The steps to approach the ombudsman can be found here
______________________
Ask Questions with this form
And I will respond to in the weekend. I welcome tough questions. Please do not ask for investment advice. Before asking, please search the site if the issue has already been discussed. Thank you.
[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]
Thank you for the wonderful reviews of GameChanger!
My second book, Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want, co-authored with Pranav Surya is now available at Amazon as paperback (₹ 199) and Kindle (free in unlimited or ₹ 99 – you could read with their free app on PC/tablet/mobile, no kindle necessary).
You can Be Rich Too with Goal-Based Investing
is my first book with PV Subramanyam. It helps you ask the risk questions about money, seek simple solutions and find your own personalised answers with nine online calculator modules.
The book is available at:
Amazon Hardcover Rs. 279. 30% OFF
Infibeam Now just Rs. 270 32% OFF. If you use a mobikwik wallet, and purchase via infibeam, you can get up to 100% cashback!!
Flipkart Rs. 279. 30% off
Kindle at Amazon.in (Rs. 90.74 74% OFF) Read with free app
Google PlayRs. 90.74 Read on your PC/Tablet/Mobile
Now in Hindi!
Pre-order the Hindi version via this link
Subscribe and join the freefincal Youtube community!
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via: Feedburner
- We are also on Google PlusandPinterest
Do check out my books
You Can Be Rich Too with Goal-Based Investing
My first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create customg solutions for your lifestye!Get it now. It is also available in Kindle format.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
My second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a youngearnerThe ultimate guide to travel by Pranav Surya
This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (instant download)Create a "from start to finish" financial plan with this free robo advisory software template
Free Apps for your Android Phone
All calculators from our book, “You can be Rich Too” are now available on Google Play!Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)
