Home loan insurance claim rejected after borrower's death: What you can learn from this real case

When Mohammad Hussain, a resident of Bilaspur in Chhattisgarh, took a home loan of ₹4,26,801 from Dewan Housing Finance Ltd. (now Piramal Capital Housing Finance Limited) on March 13, 2012, he also bought a home loan insurance policy from ICICI Prudential Life Insurance Co. Ltd.

The single premium was ₹21,801, and the monthly instalment on the loan was ₹7,367. The Home Assurance Policy was meant to discharge the outstanding loan amount if the policyholder died.

The monthly instalments were regularly deducted by lender from the bank account of Adil Mohammad, son of Hussain.

Two years later, on March 14, 2014, Hussain died due to ill health. His family expected the insurance to cover the remaining loan. Instead, the claim was denied by the insurer on the ground that Hussain had suppressed his medical history at the time of obtaining the policy. As a result, the housing finance company continued to deduct monthly instalments of ₹7,367 from Adil's account even after Hussain's death.

The family approached the District Consumer Disputes Redressal Forum, which ruled in their favour and directed ICICI Prudential to pay the remaining loan amount after March 14, 2014, reimburse the deducted instalments, and pay ₹50,000 as compensation for mental agony and ₹5,000 as litigation costs. ICICI Prudential appealed to the Chhattisgarh State Consumer Disputes Redressal Commission, which set aside the District Forum's order. The family then filed a revision petition before the National Consumer Disputes Redressal Commission (NCDRC).

The NCDRC, in an order dated August 17, 2026, upheld the State Commission's order and dismissed the family's plea.

The NCDRC order by delivered by Justice Anoop Kumar Mendiratta, Member, with AVM J. Rajendra (Retd.), Presiding Member, addressed the central question as to whether Hussain had suppressed material medical information when filling out the insurance enrollment Form.

The form asked whether the applicant had ever been treated for diabetes, raised blood sugar, hypertension, heart disease, kidney disorder, or any other serious ailment. Hussain answered "No" to every question, including whether he had been hospitalised for any disorder.

However, his medical records told a different story. The insurer submitted a certificate dated March 10, 2011, from Sai Baba Heart and Kidney Centre, RSB Hospital, Bilaspur, which stated that Hussain "was suffering from uncontrolled diabetes mellitus and P-neuropathy with nephropathy with sepsis" and had been admitted from February 9 to March 9, 2011. The certificate further noted that "he needs prolonged therapy for the same at OPD basis and regular follow and drug will cost near about ₹80,000 for next 3 months" and that "he may need amputation in future."

The insurer also submitted an Apollo Hospital discharge summary showing that when Hussain was admitted on February 28, 2014, the principal diagnosis was "Type 2 DM (since 2009), Hypertension (since 2009), CKD (since January 2014), Sepsis (Klebsiella Bacteremia, Diabetic foot, Encephalopathy)." The past history column recorded "Right BK amputation," indicating a below-knee amputation.

The NCDRC observed: "On the face of record, the medical reports relied upon by OP-2 (insurer) clearly reflect that Shri Mohammad Hussain, DLA was suffering from Diabetes Mellitus and Hypertension since 2009 with P-neuropathy with nephropathy with sepsis but failed to disclose the same." The Commission further noted that "the information was furnished to the contrary in the proposal form though DLA was bound to bona fidely disclose the ailments suffered along with the treatment undertaken."

The family's counsel argued that under Section 45 of the Insurance Act, 1938, a policy cannot be called into question on grounds of misstatement after two years. Since the policy was obtained on February 29, 2012, and Hussain died on March 14, 2014, the two-year period had just elapsed.

The NCDRC, however, held that Section 45 allowed repudiation even after two years if the insurer could prove that the suppressed fact was material and was fraudulently concealed with the policyholder's knowledge.

"On the face of record, Section 45 of the Insurance Act, 1938 bars the calling in question of an insurance policy beyond expiry of the stipulated period except in few exceptional circumstances that have to be proved by the insurer," the NCDRC said.

The Commission found that "the insurer, in the present case, has duly discharged the burden that the statement of health was suppressed and wrongly furnished by the DLA and the policy holder knew at the time of obtaining the policy that the statement furnished in the proposal form was false or had intentionally suppressed the material facts in relation to his health."

Citing the Supreme Court's decision in Bajaj Allianz Life Insurance Co. Ltd. v. Dalbir Kaur, the NCDRC said, "a contract of insurance is one of the utmost good faith" and that "a proposer who seeks to obtain a policy of life insurance is duty bound to disclose all material facts bearing upon the issue as to whether the insurer would consider it appropriate to assume the risk which is proposed."

"We are of the considered opinion that the Insurance Company was justified in repudiating the claim, since the Deceased Life Assured suppressed the material information regarding the pre-existing diseases," NCDRC concluded.

Lesson for policyholders

The case is a stark reminder that home loan insurance, unlike a standard term cover bought independently, often comes with a non-medical underwriting process where the insurer relies entirely on the proposer's self-declaration.

Any suppression of pre-existing conditions can give the insurer grounds to deny the claim, leaving the family burdened with both the emotional loss and the outstanding loan.