Claiming money that is rightfully yours

Priya Nair finds out how investors of mutual funds, shares, unclaimed bank deposits, insurance policies can redeem long-forgotten investments.
Illustration: Dominic Xavier/Rediff.com

The online push for investments, insurance and other financial transactions is gaining traction, but there are many who still have to struggle with paperwork to make claims or redeem investments made a long time ago.

Sometimes, documents are missing or signatures don't match.

A guide to going through this process painlessly.

Limitation Act in insurance

In the case of life insurance policies, there is no time frame for claiming the proceeds.

"Usually, we get claims after six to nine months, but sometimes we do get claims after more than a year. Most of the time it is because the family is not aware of the policy's existence," says Mohit Rochilani, director, operations and IT, IndiaFirst Life Insurance.

The Limitation Act, 1963, says a claimant has to intimate the insurance company about the death of the policyholder within three years after the latter's death.

But this is a broad guiding principle and insurance companies do not follow it strictly, says Ashok Kumar, senior vice-president and chief underwriter, Max Life Insurance.

In case of policies, the company will pay the money to the nominee by default.

In case of natural death, the documents required are the death certificate for the deceased -- either original or attested copy, KYC (know your customer) documents of the nominee such as address proof, and identity proof and bank details of the account where the money has to be transferred.

In an unnatural death, like accident or murder, the insurance company will also ask for the First Information Report, autopsy report and panchnama.

"The claim could be denied if the existing ailment was something so critical that the insurance company would not have issued the policy upfront," says Rochilani.

"Section 45 of the Insurance Act says if a death happens within three years of issuing the policy, it could be repudiated in case of any pre-existing disease. But, after three years, no claim can be repudiated," he adds.

Once all documents are provided, most insurance companies settle the money within a week.

In fact, some offer to pay interest if the claim is not settled within eight to 10 days.

Delays can occur if there is more than one claimant and no clear nominee.

In such cases, the company will ask the claimants for a succession certificate.

"If a claim is ready for payment, but payment cannot be made due to any reason on proper identification of the payee, the life insurer shall hold the amount for the benefit of the payee and such an amount shall earn interest at the rate applicable to a savings bank account with a scheduled bank (effective from 30 days following the submission of all papers and information)," says Max Life's Kumar.

The current savings bank account rate is four per cent.

Such problems can be avoided by providing a nominee's name at the time of buying the policy.

While this is mandatory, many a time policyholders say they will provide the details later.

There could be other practical problems like a mismatch in the name or age of the policyholder as provided in the insurance proposal form and death certificate or birth certificate.

For this, the company may ask for an affidavit.

Mutual funds

For redeeming a mutual fund investment done many years ago, you will have to do update your KYC, as the rule for the In Person Verification (IPV) was introduced a few years earlier.

This can be done either by going physically going to the fund house or online through the video-based process which is accepted as per the rules of the Securities and Exchange Board of India.

Aadhaar-based verification using a one-time password is also possible, but that is only for amounts up to Rs 50,000, says Rahul Parikh, CEO, Bajaj Capital.

Having a nominee or a joint holder at the time of investing will address the problem, says Sarvjeet Virk, MD and co-founder, Finvasia a technology-oriented financial services company.

"We are also pushing clients to buy mutual funds in demat form because that will allow easier redemption by selling the funds through the stock exchanges. There is no need to physically visit the fund houses or worry about KYC," he says.

Shares

If shares are held in physical form, they need to first be converted into demat form, for which one has to approach the registrar and transfer agent (RTA).

Information about the RTA is available with brokers or depository participants (DP).

You have to submit a demat request form to the DP.

The DP will in turn give it to the RTA, which will convert the physical shares into demat form.

"The charges will depend on the relationship with the DP. It is usually a percentage of the share value. It could also be a flat fee," says Virk.

If the original shareholder has passed away, and the valuation of the shares is less than Rs 5 lakh, they can be converted into demat with just a death certificate of the deceased.

"To transfer the shares to a heir, a no objection certificate from all family members is required, which can be done through an indemnity bond. But if the value is more than Rs 5 lakh, then the DP may ask for a succession certificate and this could take time," Virk adds.

Unclaimed bank account or deposit

A bank account that is inactive for two to three years is termed an inactive deposit and one unclaimed for seven years or more is termed an unclaimed deposit.

It is mandatory to have a nominee while opening a bank account to make recovering such deposits easier.

In case there is no nominee, the heir has to write to the branch with details such as name of the deposit holder, amount, date of maturity (in case of a fixed deposit), account number and the reasons why the amount could not be claimed.

After verifying the details including the legal heir's identity proof, the bank releases the money.

In some cases, the bank may ask for verification from a person known to both the bank and the customer.

In the case of larger amounts, the bank may ask the heir to publish a notice in a newspaper.

Again in case of a rival heir or claimant, the process for establishing the legal heir is the same as for other financial investments.