15 Days for a Death Claim, Interest at Bank Rate Plus 2%: IRDAI's Claim Settlement Timelines Explained

When an insurer sits on a death claim for months, most families assume they have no recourse beyond pleading letters and the ombudsman. Since 5 September 2024, that is no longer true. The Insurance Regulatory and Development Authority of India (IRDAI) has fixed hard deadlines for settling claims, and where an insurer misses them, it must pay you interest at the bank rate plus 2 percent — currently 7.50 percent a year — without your even asking. This deep dive explains the Master Circular on Protection of Policyholders' Interests, Ref IRDAI/PP&GR/CIR/MISC/117/9/2024, the exact turnaround times it imposes, and the arithmetic of what a delay is worth to you.

The Rule / Product

The governing instrument is the Master Circular on Protection of Policyholders' Interests, 2024, reference IRDAI/PP&GR/CIR/MISC/117/9/2024, dated 5 September 2024. It consolidates several earlier directions into a single code and applies to every regulated entity — all life insurers, all general insurers, all standalone health insurers, and every distribution channel, from agents to web aggregators. There is no carve-out for small insurers or for policies sold before the circular took effect; the turnaround times attach to the claim, not to the vintage of the contract.

The circular fixes four headline Turn Around Times (TATs). A death claim that does not warrant investigation must be settled within 15 days from the date of intimation. A death claim that does warrant investigation — for example an early claim within the first three policy years, where the insurer is entitled to look for material non-disclosure — must be settled within 45 days from intimation. A surrender or partial withdrawal request must be honoured within 7 days of the request. And maturity, survival, annuity and other income-benefit payments must be made on the due date itself, because the insurer has known that date since the day the policy was issued and has no excuse to be caught unprepared.

The enforcement mechanism is what gives these deadlines teeth. Where an insurer fails to settle within the applicable TAT, the claimant is entitled to interest at the bank rate plus 2 percent per annum, calculated from the date of receipt of intimation of the claim to the date of actual payment. Crucially, the insurer must add this interest suo-moto — on its own initiative — to the claim amount. You do not have to demand it, invoke a clause, or file a complaint to trigger it. The bank rate is the rate published by the Reserve Bank of India; as fixed at the MPC review of 5 August 2026 it stands at 5.50 percent, so the penal rate a delayed claimant earns today is 7.50 percent a year.

The circular also front-loads transparency at the point of sale. Within 15 days of accepting a proposal, an insurer must furnish the policyholder with the policy document, a covering letter, a copy of the proposal form, the Benefit Illustration (for savings products), and the Customer Information Sheet (CIS). These documents are the evidentiary spine of any later claim, which is precisely why the regulator dates their delivery so tightly.

Why It Matters

For a family, a claim delay is never merely an administrative inconvenience — it lands at the worst possible moment. The 15-day death-claim TAT means that a straightforward term-insurance payout on a clean policy should reach the nominee inside a fortnight of the documents being lodged. Before the 2024 circular, "reasonable time" was a matter of argument; now it is a matter of the calendar. If you have bought cover using a tool such as our term insurance premium calculator, the sum you modelled is the sum your family is entitled to see within that window.

The interest rule changes the incentive structure. Under the old regime an insurer that delayed a payout was, in effect, holding the claimant's money interest-free; delay was cheap. Charging the bank rate plus 2 percent — 7.50 percent today — converts every day of delay into a running cost the insurer must self-declare. For a Rs 1 crore death claim, that is roughly Rs 2,055 for every single day the payment is late, and the insurer must compute and add it without prompting. That is a strong reason for a claims team to clear a file rather than let it drift.

The 7-day surrender TAT matters for the living policyholder, not just the nominee. If you are exiting an endowment or ULIP and need the surrender value quickly — to meet a medical bill, a margin call or a school fee — the insurer no longer has open-ended latitude. The same 7.50 percent penal interest runs on a delayed surrender or partial withdrawal, which is a meaningful discipline given how large surrender proceeds on older savings policies can be.

For health cover, the circular's transparency obligations dovetail with the claim you may one day file. The Customer Information Sheet you are entitled to within 15 days sets out your sum insured, waiting periods and sub-limits in plain language, so that when you use our health insurance premium calculator to compare plans, you are comparing the terms that will actually govern a hospitalisation, not the marketing gloss.

Worked Numbers

Consider Meera, whose late husband held a term policy with a sum assured of Rs 1 crore. She intimates the claim and lodges all documents on 1 March 2026. The policy is more than three years old and there is nothing to investigate, so the applicable TAT is 15 days — the insurer should pay by 16 March 2026. Suppose it actually pays on 30 April 2026, a delay of 45 days beyond intimation.

The penal interest runs at the bank rate plus 2 percent — 7.50 percent a year — and, per the circular, is calculated from the date of receipt of intimation (1 March), not merely from the day the deadline was breached. On Rs 1 crore, the daily interest is Rs 1,00,00,000 × 7.50% ÷ 365 = Rs 2,054.79 per day. The table below sets out the arithmetic for three delay scenarios.

So on a two-month delay, Meera is owed Rs 1,23,288 on top of the Rs 1 crore, and the insurer must add it on its own motion. Note that the interest clock starts on the intimation date, which is why even a payment made a day or two after the 15-day TAT still attracts interest reckoned across the whole elapsed period.

The next table maps the four TATs and the trigger date from which interest runs in each case, so you can locate any claim on the timeline.

A word on the investigation route: the 45-day window is not a licence to delay every early claim. The circular permits investigation only where a claim genuinely warrants it, and the interest clock still runs from intimation, so an insurer that investigates and then repudiates without a sound basis has both a penal-interest exposure and an ombudsman exposure. For the mechanics of ombudsman awards and the daily penalty on insurers who ignore them, see our report on the Rs 5,000-a-day penalty and the CRC repudiation rule.

Pitfalls

The TATs are powerful, but they do not rescue a claim that founders on the policy wording itself. The most common traps sit upstream of settlement, in clauses a claimant discovers only when the file is opened.

The intimation-date trap. Interest runs from the date of intimation, but only once the claim is properly intimated with the required documents. A claim that is "reported" verbally but never lodged in writing, or lodged with a half-complete document set, gives the insurer room to argue the TAT never started. Keep dated proof — an email acknowledgement, a courier receipt, a claim reference number — of the day you filed a complete claim.

Room-rent capping and proportionate deduction. In health policies, a room-rent cap can shrink an otherwise valid claim even when the insurer settles on time. If your policy caps the room at 1 percent of sum insured per day and you occupy a costlier room, the insurer may apply a proportionate deduction across the entire bill — nursing, surgeon's fees, diagnostics — not just the room charge. A fast settlement of a reduced amount is still a reduced amount.

Co-payment and sub-limits. A co-payment clause makes you bear a fixed percentage of every claim, and a sub-limit caps specific procedures such as cataract or knee replacement regardless of your total sum insured. Neither is affected by the TAT; the circular governs when the insurer pays, not how much the contract obliges it to pay.

Pre-existing disease and waiting periods. A pre-existing disease declared or discovered can be excluded during the waiting period. The circular's 15-day CIS delivery rule is your defence here: read the CIS when it arrives and challenge any mis-stated PED status inside the free-look window rather than at claim time.

Assuming interest is automatic in practice. The circular says interest is paid suo-moto, but "should" and "did" are different verbs. If a settlement letter shows the base claim amount with no interest line despite a breach of the TAT, raise it in writing immediately and, if unresolved, escalate to the Insurance Ombudsman. The entitlement is yours whether or not the insurer volunteered it.

FAQ

What interest am I owed if my death claim is settled late?

Interest at the bank rate plus 2 percent per annum, which is 7.50 percent given the RBI bank rate of 5.50 percent fixed on 5 August 2026. It is calculated from the date of intimation to the date of payment and must be added by the insurer on its own initiative under the Master Circular of 5 September 2024.

How long can an insurer take to settle a death claim?

A death claim not warranting investigation must be settled within 15 days of intimation. Where investigation is genuinely warranted — typically an early claim — the outer limit is 45 days from intimation. Beyond these, penal interest of 7.50 percent applies from the intimation date.

Do I have to ask for the delay interest?

No. The 2024 circular requires the insurer to pay the interest suo-moto, together with the claim amount. If a settlement breaches the TAT and no interest is included, you should raise it in writing and, if necessary, approach the Insurance Ombudsman.

How quickly must a surrender or partial withdrawal be paid?

Within 7 days of the request. A delay attracts the same bank-rate-plus-2-percent interest — 7.50 percent today — reckoned from the date of the request until payment.

What documents must the insurer give me after I buy a policy?

Within 15 days of accepting your proposal, the insurer must furnish the policy document, a covering letter, a copy of your proposal form, the Benefit Illustration (for savings products) and the Customer Information Sheet. These set out your sum assured or sum insured, waiting periods and sub-limits.

Does fast settlement mean I get my full sum insured?

Not necessarily. The TAT governs the timing of payment, not the amount. Room-rent caps, co-payments, sub-limits and pre-existing-disease exclusions can all reduce a health claim even when the insurer pays inside the deadline. Read the Customer Information Sheet to understand these before you claim.

Where can I read the official circular?

The Master Circular on Protection of Policyholders' Interests, Ref IRDAI/PP&GR/CIR/MISC/117/9/2024 dated 5 September 2024, is published on the regulator's website at irdai.gov.in. The RBI bank rate is notified at rbi.org.in.