How to Win a Home Loan Insurance Claim Case

How to Win a Home Loan Insurance Claim Case – Complete Guide with Real Consumer Court Judgment (DHFL Pramerica & Aadhar Housing Finance Case, 2025)

Home loan borrowers commonly believe that once the lender deducts and pays the insurance premium to the insurance company, the loan is protected in the event of the borrower’s death. However, due to miscommunication between lenders and insurers, unclear documentation, non-issuance of policies, or lack of proper communication about premium refunds, families often face difficulty in getting the loan cleared.

This article explains how to file and win a home loan insurance claim case in India, supported by a landmark 2025 judgment passed by the District Consumer Disputes Redressal Commission–I, Hyderabad in the case of Smt. Komarole Padma vs DHFL Pramerica Life Insurance & Aadhar Housing Finance.

This judgment highlights the importance of transparency, communication, fair disclosure, and the duties of lenders when insurance is bundled with loans.

Why Home Loan Insurance Claims Get Denied

Insurance claims for housing/top-up loans are rejected for reasons such as:

·         Policy never issued, despite premium being collected

·         Proposal form declined due to underwriting concerns

·         Premium refunded without informing the insured or family

·         Documentation mismatch between lender and insurer

·         No communication of decline letter or refund to borrower

·         Loan institution failing to inform borrower of rejection

·         Lack of medical evidence to support claim rejection

·         Incorrect address used for communication

Consumer Commissions often take strict action when insurers or lenders fail to communicate properly or engage in unfair trade practices.

Case Example: DHFL Pramerica Ordered to Clear Loan of ?9,21,824 and Return Property Papers (2025)

This real case shows how a widow successfully challenged both the insurance company and the housing finance company for failing to honour the home loan insurance coverage.

Case Details

·         Case No.: C.C. 138/2024

·         Date of Filing: 19 March 2024

·         Date of Judgment: 22 August 2025

·         Complainant: Smt. Komarole Padma

·         Opposite Parties:

o    DHFL Pramerica Life Insurance Co. Ltd.

o    Aadhar Housing Finance Ltd (Hyderabad & Bengaluru offices)

Background of the Case

·         The complainant’s husband availed a Top-Up Home Loan of ?10,05,944 from Aadhar Housing Finance.

·         Loan was repayable in 108 monthly instalments (10.03.2023 to 10.09.2032).

·         To secure this loan, Aadhar Housing Finance deducted ?55,944 as single-premium and remitted it to DHFL Pramerica Life Insurance for loan-cover insurance.

·         An insurance enrolment acknowledgment was issued on 27.02.2023.

·         The borrower died on 18.07.2023.

When the complainant filed a claim:

·         The insurer cleared the first loan

·         But refused to clear the top-up loan

·         Claim was repudiated stating that the application was “declined”

·         Insurer claimed it had “refunded” ?55,944 premium to the loan account

·         But neither the borrower nor the complainant was ever informed of the refund

·         The lender also failed to disclose that no insurance coverage existed

The widow was left with an outstanding home loan and the risk of losing her mortgaged house.

Issues Raised Before the Consumer Commission

1.       Was the insurance company justified in claiming that the policy was “never issued”?

2.     Was the refund of premium actually communicated and credited?

3.    Did Aadhar Housing Finance fail to inform the borrower about the non-issuance of insurance?

4.    Was there deficiency in service or unfair trade practice?

5.    Are the insurer and lender jointly liable to clear the outstanding loan?

Findings of the Consumer Commission

After examining documents and arguments, the Commission found serious lapses by all opposite parties.

1. Insurance Premium Was Collected and Enrolment Acknowledgment Was Issued

Exhibit A3 proved:

·         Premium was deducted

·         Enrolment acknowledgment was issued

·         Borrower was shown covered under “Aadhar Shila+ Group Insurance Scheme”

Once premium is collected and enrolment issued, the insurer must:

·         Evaluate proposal fairly

·         Communicate decision promptly

·         Refund with proper intimation

·         Maintain transparency

This did not happen.

2. Decline Letter & Refund Letter Had Wrong address

The insurer produced:

·         Decline Letter (Ex. B2)

·         Refund Letter (Ex. B3)

However:

·         These documents bore a different address than the loan documents

·         No proof of delivery (no postal receipt, no SMS, no email)

·         No acknowledgment showing borrower received it

Therefore, the communication was held not served.

3. Refund Not Reflected in Loan Account

The insurer claimed refund via NEFT.
But:

·         Loan account statement did not reflect the refund

·         No bank proof was furnished

·         Dates were inconsistent

Thus, refund was not substantiated.

4. Lender (Aadhar Housing Finance) Failed in Duty of Disclosure

Even assuming insurer refunded premium:

·         Lender was duty-bound to inform borrower

·         Should have issued written intimation

·         Should have recalculated loan EMI

·         Should have disclosed that no insurance coverage existed

Opposite Parties 2 & 3 never informed the borrower or complainant.

5. Non-appearance of Opposite Parties 2 & 3

The lender remained absent and filed no evidence.

This led to adverse inference against them.

6. Insurance Company Failed to Prove Grounds for Rejection

Insurer claimed:

·         Proposal was declined due to “maximum attempt” and “medical reasons”

But:

·         No medical report produced

·         No underwriting file submitted

·         Borrower had declared “No” to all medical questions

Therefore, rejection was unjustified.

7. Supreme Court Precedent Applied

The Commission relied on:

Gokal Chand (2022 INSC 1285)

The Supreme Court held:

·         If premium is collected and medical declarations are submitted,
a binding insurance contract exists

·         Later repudiation without proper notice amounts to deficiency in service

This was directly applicable.

Final Order (22 August 2025)

The Commission held all opposite parties (1, 2 & 3) jointly and severally liable.

1. Insurance Company to Pay: ?9,21,824

(Future Principal Outstanding as per Loan Statement)

2. Lender to Adjust Amount Without Penal Charges

OP 2 & 3 must:

·         Accept payment

·         Clear outstanding loan

·         Not levy late fees or penalties

3. Return Original Title Deeds

Lender must return:

·         Mortgaged property documents

·         Other relevant papers

4. Issue Loan Clearance Certificate

Confirming full closure of Loan A/c No. 0000313.

5. Compensation: ?1,00,000

For mental agony and harassment.

6. Litigation Cost: ?35,000

7. Compliance in 45 Days

Failing compliance:

·         Opposite parties must pay ?50,000 as damages

How to File a Home Loan Insurance Claim (Step-by-Step)

1. Collect all loan & insurance documents

·         Loan sanction letter

·         Insurance enrollment form

·         Premium receipt

·         Bank statements

·         Death certificate

·         Medical records

2. File a claim with the insurer and lender

Send:

·         Written application

·         All supporting documents

·         Keep email/Speed Post proof

3. Seek written communication

Demand:

·         Status of claim

·         Reasons for delay

·         Policy or rejection letter

4. Approach Consumer Commission if:

·         Premium deducted but policy not issued

·         Refund made without intimation

·         Claim rejected without justification

·         Lender keeps original title documents despite request

Consumer Commissions provide strong remedies.

When You Can Win a Home Loan Insurance Dispute

You have a strong case if:

·         Premium was collected and no policy issued

·         Decline/refund letter never communicated

·         Refund not reflected in loan account

·         Lender hid important information

·         Insurer produced no medical evidence for rejection

·         Lender or insurer remained absent in proceedings

·         Borrower died after enrolment acknowledgment

·         There is mismatch in addresses used for communication

Such situations are classic examples of deficiency in service.

Key Takeaways

·         Lenders must inform borrowers if insurance is not issued.

·         Insurers must communicate policy rejection properly.

·         Refunds must be proven through proper bank records.

·         Premium deduction + enrollment = insurer’s obligation.

·         Non-appearance of a party leads to adverse inference.

·         Borrowers and nominees must preserve all documents.

·         Consumer Commissions can grant loan clearance + return of documents.

Conclusion

This 2025 judgment clearly establishes that lenders and insurers cannot escape liability by claiming “policy was not issued” when premium was collected and enrollment acknowledgment was issued. Lack of communication, improper refund, wrong address, and non-disclosure amount to deficiency in service and unfair trade practice.

The ruling in Komarole Padma vs DHFL Pramerica & Aadhar Housing Finance demonstrates that nominees can win home loan insurance disputes and secure:

·         Loan clearance

·         Return of property documents

·         Compensation

·         Litigation costs