Bank refunded insurance premium after borrower's death, denied claim; family gets relief
A consumer commission in Jammu and Kashmir ruled that a bank cannot deny loan-linked insurance benefits to a deceased borrower's family by retroactively refunding the premium. The court held the bank and insurer jointly liable for service deficiency.
Why it matters
This ruling protects consumers from predatory banking practices where institutions attempt to avoid insurance payouts after a policyholder's death.
NEW DELHI: A district consumer commission in Jammu and Kashmir has ruled that a bank cannot deny loan-linked insurance benefits to a deceased borrower's family by simply reversing the premium after his death. In its July 16 order the commission held Jammu and Kashmir Bank and PNB MetLife India Insurance jointly liable for deficiency in service and unfair trade practice, and directed them to pay the insurance amount.How did the loan insurance dispute begin?The complaint was filed by Shahzada Begum, widow of Mohammad Ayoub Dar, along with their three minor children. According to the complaint, Dar had taken a cash credit loan from J&K Bank to set up a garment business. Before disbursing the loan, the bank deducted Rs 16,000 from his account towards a loan-linked insurance premium, which he accepted.Dar died on June 1, 2022.
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