Insurance in India plays a vital role in protecting individuals and businesses from unexpected losses. Whether it’s life, health, vehicle, or property insurance, every policyholder enters into a legal contract that comes with well-defined rights and responsibilities. These terms are not just technical but are designed to offer protection, promote fairness, and build trust between the insured and the insurer.
In this blog, we break down the key rights you hold as an insured individual and the responsibilities you are expected to uphold under Indian insurance law.
Policyholder Rights You Should Know
Understanding your rights as a policyholder is the first step toward financial security. These rights are governed by the Insurance Act, 1938, and guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI). They ensure that every policyholder is treated fairly and transparently by insurers.
1. Right to Full Disclosure
Every policyholder has the right to receive complete and honest information before and after purchasing a policy. This includes knowing about inclusions, exclusions, claim processes, terms of renewal, and cancellation conditions. A policy should not include hidden clauses or unclear terms.
Example: If you buy a health policy, you must be told whether maternity benefits are included, the waiting periods, and the list of network hospitals.
2. Right to Fair and Timely Claim Settlement
Insurers are legally bound to settle valid claims within a specific time frame. As per IRDAI rules, if the documents are in order, the claim must be processed within 30 days. Any delay beyond that must be communicated with a valid reason.
Fact: Over 90% of life insurance claims in India are now settled without disputes, showing improved policyholder service standards.
3. Right to Portability and Continued Coverage
Policyholders, especially in health insurance, have the right to switch from one insurer to another without losing accumulated benefits. Portability ensures that your waiting periods for pre-existing conditions carry forward. Additionally, insurers cannot deny policy renewals without a valid reason such as fraud or non-payment.
Example: A family shifting from one insurer to another due to poor service can retain their policy benefits through the portability option.
4. Right to Grievance Redressal
In case of dispute or dissatisfaction, policyholders can approach the insurer’s grievance redressal team, and if needed, file a complaint with the Insurance Ombudsman or use IRDAI’s Integrated Grievance Management System (IGMS).
Tip: Maintain written records of all interactions with your insurer. These documents can support your case during complaints or appeals.
Your Legal Responsibilities as the Insured
Insurance is not one-sided. For the policy to remain valid and effective, you as a policyholder must also fulfill your legal obligations. These responsibilities help insurers assess risk properly and offer protection to deserving policyholders.
1. Duty of Honest Disclosure
When applying for insurance, the proposer must disclose all relevant facts accurately. Hiding information or providing incorrect details can lead to rejection of claims or cancellation of the policy.
Example: Not declaring a pre-existing illness in a health policy application may lead to the rejection of a claim later.
2. Timely Payment of Premiums
To keep your policy active, premiums must be paid on or before the due date. A grace period may be available for some policies, but delay beyond that can cause the policy to lapse.
Tip: Use auto-debit options or set reminders to avoid missing premium deadlines.
3. Duty to Prevent Damage or Loss
Policyholders must take all reasonable steps to safeguard the insured asset. For example, locking a shop after business hours or following traffic laws while driving shows you are acting responsibly.
Real-life case: A factory owner failed to install a basic fire safety system. After a fire, the insurer reduced the claim amount due to negligence.
4. Timely Notification of Claims
The insured must inform the insurer about any incident that could lead to a claim, immediately or within the time frame mentioned in the policy.
Example: If your car is involved in an accident, informing the insurer within 24 to 48 hours is usually necessary to process a valid claim.
Why Knowing Rights and Duties Matters
A well-informed policyholder is empowered to use insurance as a smart financial tool, not just a formality. When rights are protected and duties are followed, claim settlements are faster, disputes are fewer, and policy benefits are maximized.
Many insurance complaints in India arise not because of fraud but due to a lack of understanding of the policy terms or obligations. Reading the policy document carefully and keeping communication clear with your insurer can avoid such situations.