Table of contents
- What are the most common reasons for claim rejection?
- How to avoid claim rejection?
- What if your claim gets rejected?
How many times have you asked yourself “Will the insurance company for which I am paying premiums regularly will settle the claims or reject the claims due to any reason in case of any mishappening to me?
Will my family get the claim benefits or not?
An insurance policy/term insurance will be the financial security for the family if the bread winner of the family passed away. The financial security will be ensured only if the term insurance claim is settled by the insurance companies in a hassle-free manner. If the term insurance claim got rejected then the financial security of the policy holder’s family will be in deep trouble.
Then why the insurance companies/term insurance is rejecting the claim?
Insurance policies/Term Insurance are issued based on the facts and information provided by the policy holder in the proposal form while taking the policy. If he/she has not provided adequate information or hiding any information in the proposal form then it leads to claim rejection.
Now let’s see the common reasons for claim rejection.
What are the most common reasons for claim rejection?
1. Incorrect information
Fill details such as age, qualification, occupation, income, lifestyle (smoking/drinking), information on previous policies and claims if any, and all other information in the form correctly. These are important factors in determining the premium. Incorrect or incomplete information can be taken as fraud and lead to rejection of the claim.
2. Non-disclosure of medical history
Disclosure of previous and existing medical conditions, surgeries, operations, etc is compulsory as it influences the premium. Most term insurance calculators ask for your lifestyle choices (like smoking) while calculating premiums. Health conditions of family members especially conditions like cancer, blood pressure, cardiovascular diseases, or any other hereditary conditions must be informed.
3. Not filling the form by yourself
Fill the form by yourself. This will help you understand the policy better and choose the best features that suit your family’s needs.
4. Not updating nominee details
It is important to keep updated about the details of the nominee (contact information, address, etc). Failure to do so causes trouble during the processing of the claim and may lead to rejection of the claim.
5. Policy lapse due to non-payment of premiums
In case you missed paying your premiums, the policy lapses after the grace period (which is a maximum period of 30 days in annual premium policies). In case your policy lapses, try to pay the prescribed fees and continue the policy since its worth your family’s security. If you don’t choose to, then all your premiums paid go waste and there is no chance of getting it back. Hence it’s better to choose a direct debit facility to ensure your policy doesn’t lapse.
6. Not disclosing existing insurance policies
You must disclose all your previous and existing life insurance policies (name of the insurer, the sum assured, and policy number) while purchasing a new life insurance plan. Rejection of claims may also happen if you fail to disclose these facts.
7. Contestability period
Companies add a contestability clause in the policy while selling a life insurance policy. It means that if death happens shortly after the policy is taken, the claim could be rejected. Once the policy is taken, the contestability period comes into effect. This period ranges from one to two years. If a death happens within that period, the company may make an investigation. Claims also get rejected in case of suicides.
8. Type of death
Insurance companies have a standard exclusion list of deaths to avoid losses. The claim gets rejected if the policyholder has been part of hazardous activities or if the person dies of a pre-existing disease. They very minutely check the reason for death. Death due to suicide, adventure sports, drug overdose, intoxication, terrorist attacks, natural calamities, or homicides is generally not covered.
9. Delay in filing the claim
Claims get rejected if there is a delay in filing. It is rare but can happen if the delay is too long. The Insurance Regulatory and Development Authority of India (IRDAI) has informed insurance companies not to reject claims due to delays. However, it is better to promptly file the claim. Insurance companies may not outrightly reject claims but may delay in paying.
10. Avoiding medical tests
Most insurance companies conduct medical tests especially in case of old age or higher risk coverage. If you don’t take these medical tests, there are high chances of your claim being rejected stating pre-existing disease. So if you take the medical tests, the pre-existing diseases will be covered.
11. Not updating the changes
A change of address, an accident, or death of the nominee should immediately be brought to the notice of the insurance company. If not, there are chances that your claim gets rejected. Now let’s see how insurance claim rejection is avoided.
How to avoid claim rejection?
If you follow the below 8 steps while taking the term insurance policy, it not only avoids the claim rejection but also assures the financial security of your family.
1. Caution: Don’t trust your insurance agent mindlessly
We are always in a hurry and want things to happen in a jiffy. We never read the proposal form completely and fill the details required in the form. We just sign the form and ask the insurance agent/advisor to fill the details required and issue the cheque. This is absolutely a wrong practice. The agent does not know completely about yourself and the medical history of your family. He may fill some incorrect information and submit the form to meet his sales targets. Also don’t think that the agent is doing a favor for you by overlooking your health problems .
Always fill the form by yourself and keep a copy of the form. Verify the details printed in the policy document with a copy of the details filled. If you found any discrepancy inform the insurance company immediately to rectify it.
Insurance also needs the same amount of time and interest like as we do other investments like real estate, mobile phones, cars etc. We never allow a showroom guy to choose a mobile phone for you like-wise don’t allow an insurance agent to fill the forms for you.
2. Why giving incorrect information in the application don’t work and what to do about it?
It is our duty to disclose all the required information to the insurance companies. If you are hiding some facts and not maintain transparency then your claim may be rejected. To avoid this always furnish the correct and true information like your age, height, weight, occupation, income, existing policy details and any other details asked in the form. Mostly we don’t reveal the details of other policies we hold. It takes some time to gather the details of the existing insurance policies. For that reason mostly we hide these details. This can be avoided and furnish the complete information about your existing insurance/term insurance policy details to avoid any claim rejection in the future.
3. Medical history: One mistake that can ruin the claim settlement
The most important part of the proposal form is the details of the medical history of the proposer and his family. Based on this information the insurer will arrive at the premium to be charged and whether the policy can be issued or not. Disclose all the relevant facts regarding the medical history of you and your family. It is also important to disclose the habits pertaining to the consumption of alcohol and tobacco. Be honest in declaring these details to avoid the claim rejection.
4. Stop avoiding Medical Tests; Start accepting Medical Tests
Based on the information provided in the proposal form underwriter will assess the risk and the policy will be issued. Sometimes for higher sum assured policies and term insurance plans you need to undergo medical tests compulsory. Don’t avoid such medical tests. This will reduce the chances of a claim being rejected on the basis of pre-existing diseases.
5. Now update the nomination and help your beneficiaries get the claims faster
We bought life insurance/term insurance mostly for tax saving purposes and not worried much of the nomination. Usually, we nominate our parents when we are unmarried and failed to update the nominee after marriage. It may happen at the time of claim both policy-holder and the nominee was not alive. Usually, nominees are not changed frequently as people change addresses. But it is important to update the nominee details if there is any change in nominee or incase the nominee had passed away earlier than the life assured. Here the claim may not get rejected but to follow certain legal formalities to get the claim.
6. Policy lapse: The biggest threat to claim settlement
You will get the claim only when the policy is in force. It is more important to pay the premiums on or before the due date. Insurance companies are providing some grace days if we fail to pay the premiums on the due date. The claim will not be paid if the policy is not renewed within the grace period and something happens on the next day after the grace period is over. This is also a reason for rejecting the term insurance claim
7. Don’t delay filing the insurance claim
The sooner you intimate the company, the easier your claim will be processed. You may not be rejected the claim but they might delay paying you the claim.
8. Thoroughly scrutinize the policy
Check thoroughly for all the exclusions in the policy, so that you are not denied the claim at the last moment due to exclusions.
If you could take the points from the above factors and avoid claim rejection, then your family will achieve their financial goals for sure even if you are not around. Isn’t it better to know all these points beforehand, so that you won’t be denied your claims later?
Now let’s see what to do if your claim gets rejected.
What if your claim gets rejected?
After you submit the documents, the insurance company gets back to you with the following:
- Missing detail
- Acceptance of the claim
- Rejection of the claim
If you have incomplete information, complete it at the earliest. If your claim is rejected, the company provides a reason for it and you have the right to appeal against it. If your company has rejected your claims based on unproven grounds, you need to contact the company’s representative. If you don’t get a positive response you can take the help of the IRDAI.
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