Insurance Law and Insurance Claims- India
In legal term, Insurance is a legal contract between the insurer (insurance company) and the insured (individual person) wherein the insured is compensated for the financial losses arising out of the unforeseeable events, for which premiums were paid by the insured person.
The insurance is classified into:-
Life Insurance covers the insured person against the risk of death and health insurance claims. There are various variants under a life insurance policy including whole life insurance plans, unit-linked investment plans, term plans, money back plans, endowment plans, etc.
General Insurance covers the financial losses which are caused by various risks other than the death of a person, such as travel insurance, marine insurance, health insurance, liability insurance, motor insurance, commercial insurance, etc.
Laws governing Insurance
- The Insurance Act, 1938
- Life Insurance Corporation Act, 1956
- Marine Insurance Act, 1963
- General Insurance Business (Nationalization) Act, 1972
The borrowers have certain rights even after a loan default
A loan default is a civil offence and not a criminal offence. Even after default, the borrower has certain rights, and the bank has to respect those rights.
Due to certain circumstances such as job loss, accidental disability, or other reasons, some people lose their income and are unable to repay their loans. In such cases, the bank tries to recover the loan, and if not successful, it eventually takes steps to repossess the asset. Even if one has defaulted on a loan, they have some defaulter rights. The bank has to follow a certain recovery procedure and make sure they respect the defaulter’s rights.
- Right to adequate notice
- Right to be heard
- Right to fair valuation of assets
- Right to getting balance proceeds
- Right to be treated humanely
Unfavourable circumstances may force a borrower to default on their loan obligation. But a borrower needs to realise that a loan default is a civil offence and not a criminal offence. Even though they may have defaulted, as per the rights of loan defaulters, they still have the right to be treated with respect, the right to be heard, the right to adequate notice for repossession of the asset, and the right to get any excess amount from the sale proceeds.