Should You Tell Your First Insurer About Your Second Life Insurance Policy?


Should You Tell Your First Insurer About Your Second Life Insurance Policy?

Have you taken a second life insurance policy and wondered whether you should disclose this to the first life insurance company? There are many terms and conditions in a life insurance policy which have to be adhered to by the insured customer and of these, changes to the material risk should be particularly communicated to your insurance company so that they can change the underwriting decisions accordingly. 

But, is it necessary to inform your first life insurance company regarding your second life insurance policy taken from a different insurance company? This was the question addressed by the Consumer Disputes Redressal Commission of Hyderabad. 

The matter in this case pertains to the demise of Mr. K Prabhakar Rao due to a fatal accident. Mr. Rao drowned in a canal after accidentally slipping into it. While the family immediately rushed to the location they failed to find to rescue Mr. Rao. 

Mr. Rao’s wife subsequently lodged a complaint with the local police station immediately. Mr. Rao’s son Surya also lodged a claim with the Life Insurance Corporation of India (LIC). Surya submitted all the required documents such as FIR, policy details, death certificate etc. required for processing the death claim. But to his surprise, Surya was intimated that the claim was rejected due to the non-disclosure of material fact. The material fact in this case was a subsequent policy taken by Mr. Rao from another insurance company. 

Mr. Rao had taken another insurance policy from SBI life insurance company after taking the first life insurance policy from LIC. The rejection report from LIC stated that the insured failed to intimate the subsequent policy details taken from SBI. 

Aggrieved by this, Mr. Surya approached the District Commission pointing that despite submission of original policy and other policy related documents the claims were repudiated by LIC. 

LIC argued that the insured had not submitted all the material facts under “Uberrima fides”, at the time of taking the policy and therefore the claim was repudiated. 

The district commission noted that the insured had taken the second policy from SBI after a long time of taking a life insurance policy from LIC. LIC’s argument of non-disclosure of material facts (any other life insurance plans) was not applicable here as the insured has taken LIC first and then subsequently SBI policy

The commission questioned how it would be possible for the insured to declare SBI policy details at the time of taking life insurance from LIC as the two events had occurred separately, with LIC events occurring first and SBI next. Therefore, the commission held that there was no suppression of material facts by Mr. Rao and directed LIC to settle the claim with interest. 

Moral of the Case – It is important to note that at the time of taking any insurance policy, you should declare if you hold any similar insurance plans from any other insurance company. Since, in Mr. Rao’s case, the SBI policy was taken after LIC, he was supposed to declare LIC policy details to SBI but not the other way around.

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Susheel Agarwal