What counts as fraud vs non-disclosure under Section 45

When an insurer rejects a life insurance claim, the reason usually falls into one of two categories: non-disclosure or fraud. The words sound similar, but the legal standards, the burden of proof, and the outcomes are very different. Knowing where the line falls can mean the difference between your family receiving the claim and fighting for it in court.

The current articles on this site (and most insurance content in India) blur this distinction. This article uses actual court rulings to show exactly where courts draw the line.

Non-disclosure vs fraud: the legal definitions

Non-disclosure (also called suppression of material fact) means you failed to mention something on your proposal form that the insurer considers material. You may not have known it was material. You may not have even known about the condition. The insurer must prove two things: that the fact was material, and that you knew about it at the time of the application.

Fraud means you actively made a false statement or concealed a known condition with the intent to deceive the insurer. The legal standard is higher. Under Section 45(2) of the Insurance Act (as amended in 2015), the insurer must prove: (a) the statement was false or a fact was suppressed, (b) the fact was material to the life expectancy of the insured, (c) you knew the statement was false or the fact was being suppressed, and (d) the misstatement was made with intent to deceive. All four conditions must be met. They are cumulative, not alternative.

Where courts draw the line: case patterns

Legal definitions are abstractions. What matters is how courts apply them to real situations. Here are four patterns from 173 analysed NCDRC judgments that show where the line falls in practice.

Pattern 1: “I didn’t know it mattered” (non-disclosure; consumer wins)

In Aegon Life vs Santosh Devi (Rajasthan SCDRC), the insurer alleged the policyholder had concealed a tuberculosis diagnosis. The medical evidence was inconclusive; there was no clear proof that the insured had been diagnosed with TB before the application. The court held that the insurer failed to meet the burden of proof under Section 45(2). The claim was paid.

This pattern appears frequently. The insurer finds a medical record after the policyholder’s death and treats it as proof of concealment. But finding a record is not the same as proving the insured knew about the condition and deliberately withheld it. Courts have consistently held that the insurer must prove knowledge, not just the existence of a prior condition.

Pattern 2: “The agent filled the form” (no suppression; consumer wins)

In Branch Manager LIC vs Permanent Lok Adalat (AP High Court, 2019), the insured was illiterate and the insurance agent had filled out the English proposal form. The insurer alleged non-disclosure of a health condition. The court held that the insurer cannot benefit from misrepresentations made by its own agent. If the agent did not ask the right questions or did not record the answers accurately, that is the insurer’s problem.

This principle applies beyond illiteracy. Many policyholders sign proposal forms filled by agents without reading every line. Courts apply the doctrine of contra proferentem: where a document drafted by one party (the insurer) is ambiguous or was filled by the insurer’s agent, the ambiguity is resolved against the drafter. If the proposal form’s questions were vague or the agent rushed through them, the insurer bears the risk of incomplete information.

Pattern 3: “Clear concealment of a serious condition” (fraud; insurer wins)

In Bajaj Allianz vs Dalbir Kaur (SC, 2020, three-judge bench), the insured had Hepatitis C and was hospitalised for vomiting blood one month before taking the policy. He answered “No” to all health questions on the proposal form. He died 37 days after the policy was issued. The Supreme Court upheld the insurer’s repudiation.

This is what fraud looks like in practice. The insured had a serious, diagnosed condition. He was hospitalised immediately before the application. He answered “No” to health questions he knew the answer to. The proximity between the hospitalisation, the application, and the death made the intent to deceive clear. Courts do not protect this kind of deliberate concealment.

A similar pattern appeared in LIC vs Chanda Devi (NCDRC, 2025), where the insured was hospitalised for prolonged illness 7-8 months before the proposal and answered “No” to all health questions. The NCDRC upheld repudiation on fraud grounds. (This case was decided under the old, pre-2015 Section 45.)

Pattern 4: “Previous policies are not material” (new law changes the standard)

In HDFC Standard Life vs Vasundhara (NCDRC, 2024), the insurer alleged non-disclosure of previous insurance policies held with other companies. Under the amended Section 45(4), the NCDRC held that previous policies are not material because they have no direct bearing on the life expectancy of the insured. The court established what it called the “due diligence doctrine”: the insurer should verify policy history through the IIB (Insurance Information Bureau) database rather than relying on the proposal form alone.

This was reinforced in Balbir Kaur vs PNB MetLife (NCDRC, 2026), where the insurer alleged non-disclosure of three Birla Sun Life policies. Two had been rejected on the same day as the application (never in force) and one was a terminated health plan. The NCDRC held that only policies currently “in force” need to be disclosed, and even then, previous policies are not material under Section 45(4).

The materiality test under Section 45(4)

Before the 2015 amendment, courts interpreted “materiality” broadly. Almost any fact about the insured could be considered material. The 2015 amendment changed this by adding Section 45(4), which defines materiality with two specific conditions: the misstatement must have a “direct bearing on the risk undertaken by the insurer,” and it must relate to “the expectancy of the life of the insured.”

This is a policyholder-friendly change. It means the insurer cannot reject a claim based on facts that, while technically undisclosed, have nothing to do with the insured’s life expectancy. Previous insurance policies, as the NCDRC ruled, do not meet this test. Neither would facts like income, occupation (in most cases), or lifestyle habits that do not affect mortality risk.

Facts that clearly meet the materiality test: a diagnosed heart condition, a cancer diagnosis, chronic kidney disease, a recent hospitalisation for a serious illness, HIV status. These directly affect life expectancy and must be disclosed. Facts that may not meet the test: a mild seasonal allergy, a one-time doctor visit for a common cold, a family member’s condition that the insured was unaware of.

What this means for your claim

If you genuinely forgot to mention a minor condition, the law protects you more than you think. The insurer must prove you knew about it and deliberately withheld it. After 3 years, under the amended Section 45(1), the policy cannot be questioned on any ground. Even within 3 years, the insurer’s burden is high: they need to prove knowledge, materiality, and falsity, all cumulatively.

If the agent filled your proposal form, you have a strong defence. Courts have consistently held that the insurer cannot benefit from its own agent’s errors. If you can show that the agent controlled the process and you signed what was presented to you, the insurer’s case weakens significantly.

If you deliberately concealed a serious condition, courts will likely side with the insurer, especially within the first 3 years. The cases are clear: recent hospitalisation followed by “No” answers on the proposal form, diagnosed chronic conditions that were hidden, conditions that directly caused the death. Courts see through deliberate concealment and do not reward it.

The practical rule: disclose everything. If you had a health episode, mention it. If you were hospitalised, mention it. If you have a family history of a condition, mention it. The worst that happens with full disclosure is a slightly higher premium or an exclusion. The worst that happens with concealment is your family’s claim being rejected when they need it most.

Related reading

• Section 45 explained: what actually happens after 3 years
• The 3-year clock: when it starts, when it resets, and what resets it
• Non-disclosure and life insurance claim rejection
• Why term insurance claims get rejected and how to prevent it
• 173 court cases analysed: life insurance disputes