Consumer Court Orders LIC to Pay ₹60 Lakh Insurance Claim, 9% Interest After Rejecting Death Benefit
Consumer Court Orders LIC to Pay ₹60 Lakh Insurance Claim, 9% Interest After Rejecting Death Benefit
23 July, 2026: In a major ruling that reinforces the rights of insurance policyholders, the National Consumer Disputes Redressal Commission (NCDRC) has ordered the Life Insurance Corporation of India (LIC) to pay a ₹60 lakh life insurance claim that it had earlier rejected. The Commission also directed the insurer to pay 9% annual interest, ₹1 lakh as compensation for mental harassment and ₹50,000 towards litigation expenses.
The dispute dates back to 2010 when Mumbai resident Nitin Suresh Gambhir applied for five life insurance policies with LIC. As part of the underwriting process, LIC arranged a medical examination through its empanelled doctor before issuing the policies. Three policies with a combined sum assured of ₹40 lakh were issued on August 26, 2010, while the remaining two policies worth ₹20 lakh were processed later.
According to the claimant, the first premium for the last two policies was deposited on September 7, 2010. However, LIC argued that it received the premium only on September 13, 2010, and maintained that the insurance risk for those policies commenced from that date.
Meanwhile, Nitin was admitted to P.D. Hinduja National Hospital on September 11, 2010, after a wound on his right foot failed to heal. During treatment, doctors diagnosed him with diabetes. He was discharged two days later after receiving treatment.
Nearly three years later, on June 11, 2013, Nitin died following a heart attack. His mother, Jayashree Gambhir, submitted claims under all five insurance policies. LIC rejected the claims, alleging that the policyholder had concealed his diabetic condition while submitting the proposal forms.
The matter first reached the Maharashtra State Consumer Disputes Redressal Commission, which held that LIC was liable to pay claims under the first three policies amounting to ₹40 lakh, as the insurance cover for those policies had begun before Nitin’s hospitalisation. However, the Commission did not allow claims under the remaining two policies.
Dissatisfied with the decision, both parties approached the NCDRC. While the claimant sought payment under all five policies, LIC challenged the State Commission’s order in its entirety.
After reviewing the evidence, the National Consumer Commission observed that LIC had failed to establish that Nitin was suffering from diabetes before he submitted the insurance proposal forms. It also noted that the insurer could not produce any medical records proving that he had intentionally suppressed material health information.
The Commission further found documentary evidence showing that the premium for the remaining two policies had been received on September 7, 2010, through a proposal deposit receipt. It held that insurance risk begins once the proposal is accepted along with the premium, and therefore the coverage was already in force before Nitin’s hospitalisation.
The NCDRC also observed that there was no evidence linking the foot wound or the subsequent diabetes diagnosis to the heart attack that caused Nitin’s death.
Allowing the claimant’s appeal and dismissing LIC’s plea, the Commission directed the insurer to pay the full insured amount of ₹60 lakh. In addition, LIC has been ordered to pay interest at the rate of 9% per annum from July 2014 until the date of payment, along with ₹1 lakh as compensation for mental agony and ₹50,000 towards legal costs. The ruling is expected to serve as an important precedent in disputes involving insurance claim rejections and the commencement of policy risk coverage.
