Life Insurance Policy Cannot Be Equated With Recurring Deposit; Maturity Proceeds Depend on Policy Terms and Risk Factors: J&K State Commission

The Jammu & Kashmir State Consumer Disputes Redressal Commission (JKSCDRC), Jammu, comprising Smt. Nighat Sultana (President (O)) and Sh. Maheep Gupta (Member), has upheld the dismissal of a consumer complaint against the Life Insurance Corporation of India (LIC), holding that a life insurance policy cannot be equated with a recurring deposit, as the maturity proceeds depend upon the terms of the policy and the applicable bonus, and not merely on the total premiums paid. The Commission observed that a life insurance policy is a specialized hybrid instrument in which a portion of the premium is allocated towards the insurance risk undertaken by the insurer, unlike a recurring deposit where repayment exceeding the amount deposited is guaranteed through interest. Facts Mansa Ram challenged the order of the District Consumer Disputes Redressal Commission, Jammu, dismissing his consumer complaint against the Life Insurance Corporation of India (LIC). According to the complainant, he had obtained an insurance policy for a period of seven years. However, LIC issued him a policy with a ten-year term. He further alleged that he had paid total premiums amounting to ₹2,82,340, but received only ₹2,67,400 as maturity proceeds and, therefore, sought appropriate relief against the insurer. The District Consumer Disputes Redressal Commission dismissed the complaint after holding that the complainant had failed to produce any evidence to establish that the policy was for seven years, whereas LIC had produced the policy document, proposal form and status report showing that the policy was for ten years. It held that the parties were bound by the terms and conditions of the insurance policy. Aggrieved by the dismissal of his complaint, the complainant preferred the present appeal before the State Commission. Contentions of the Insurer The Life Insurance Corporation of India (LIC) contended that it had fully discharged its obligations under the policy. It submitted that the policy was, from its inception, a ten-year participating endowment policy, as clearly reflected in the proposal form, policy document and renewal premium receipts. LIC argued that the complainant's claim that the policy was intended for seven years was unsupported by any documentary evidence. With regard to the maturity proceeds, LIC submitted that the payment of ₹2,67,400 was strictly in accordance with the terms of the policy and comprised the basic sum assured of ₹2,00,000, a vested bonus of ₹61,400, and an interim bonus of ₹6,000. It argued that the maturity amount was correctly calculated under the contractual terms and that no further amount was payable to the policyholder. Observations & Decision The Commission found no merit in the complainant's( appellant) contention that the insurance policy was issued for a period of seven years. It observed that the proposal form, policy document and renewal premium receipts consistently reflected that the policy was a ten-year participating endowment policy. The complainant had failed to produce any documentary evidence to substantiate his claim, whereas LIC had placed on record documents conclusively establishing the policy term. The Commission further observed that the tenure of a life insurance policy is determined at the proposal stage and there is no concept of extending the policy period midway during its currency. On the issue of the maturity amount, the Commission held that a life insurance policy cannot be treated as a pure investment instrument like a recurring deposit. It observed that a portion of every premium is allocated towards the insurance risk undertaken by the insurer, while the remaining amount forms the savings component. The Commission noted that the complainant was 65 years old at the commencement of the policy and observed that the risk premium under a life insurance policy is determined by several underwriting factors, including the age of the proposer. It further explained that under a participating endowment policy, the maturity proceeds comprise the sum assured and the accumulated bonuses, which may or may not exceed the total premiums paid. The Commission reiterated the settled principle that courts and consumer fora cannot rewrite the terms of an insurance contract and are bound by the policy conditions. Holding that LIC had discharged its contractual obligations by paying ₹2,67,400, comprising the sum assured of ₹2,00,000, vested bonus of ₹61,400, and interim bonus of ₹6,000, in accordance with the policy terms, the Commission found no infirmity in the order of the District Consumer Commission. Accordingly, the Commission dismissed the appeal, upheld the impugned order and directed the parties to bear their own costs. Case Title: Mansa Ram v. Life Insurance Corporation of India & Ors. Case No.: First Appeal No. 45 of 2025 Click here to read/download the order

Life Insurance Policy Cannot Be Equated With Recurring Deposit; Maturity Proceeds Depend on Policy Terms and Risk Factors: J&K State Commission

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Life Insurance Policy Cannot Be Equated With Recurring Deposit; Maturity Proceeds Depend on Policy Terms and Risk Factors: J&K State Commission

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