Articles 705 views May 7, 2020

Term Insurance Claim Rejection Reasons

Term Insurance plans offer financial support to the family of the policyholder on happening of any unfortunate event. These plans offer guaranteed financial support to the family in the absence of the policyholder. Term insurance is available at an economical cost and the insurance provider pays a death benefit to the nominee of the family on the death of the insured during the term of the plan. It is a must-have plan for every adult and is an ideal addition to the portfolio. The individuals who are in a high risk category has strict terms and conditions.

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Term Insurance Claim Rejection Reasons

The chances and reasons for claims being rejected is higher if you have furnished incomplete or incorrect information at the time of filling the proposal form of the insurance plan to the concerned insurance company. Some of the reasons for term insurance claim rejection are discussed below:

Hiding The Medical History, Important Family Information And Lifestyle

If the policyholder has hidden the medical history or any important family information or lifestyle such as smoking or drinking habits, it may lead to rejection of the claim. If the policyholder smokes regularly and declares himself as a non-smoker in the proposal form it is but obvious that the claim would be rejected. It is because the policyholder is expected to mention all important details which affect mortality risk when buying the policy. This is called utmost good faith and the policy is issued based on this principle. However, if the policyholder hides material information, the insurance company has the right to reject claims.

Not Disclosing Pre-existing Diseases

Disclosing pre-existing diseases is very important when you want to attach any riders or add-ons such as critical illness riders with your basic life insurance policy. As it is a cover related to the health of the policyholder then one must disclose the already existing diseases. If the diseases are not disclosed, it again causes a breach of utmost good faith and the claim under such an insurance policy would be rejected in such cases.

Delay In Filing Of The Claim

If the policyholder makes delay in filing of the claim beyond a stipulated time period then it may give rise of suspicion and the insurance company may investigate the reasons for such delay. This may require additional time and lead to rejection of the claim

Policy Lapse

The most important criterion for the approval of the claim is to ensure that your insurance policy is in force. Hence one must pay the premiums on time to keep the insurance policy in force. In case of non-payment of the premium due to any unavoidable circumstances, the policyholder is given a grace period within which the policyholder can pay the due amount of premiums. if, however, the due premiums are not paid even within the grace period, the policy would lapse. The coverage stops when the policy lapses and thus, in case of a claim, the insurance provider will reject the claim.

The Insured Suffered An Uncovered Death

In case the insured suffered a death that was not covered in the policy, the claim will be rejected by the insurance company. If the policyholder dies during the waiting period of the insurance policy

The contestability or waiting period plays a significant role in rejections of the claim. Every insurance policy has a waiting period. If the death of the insured occurs right after buying the insurance policy then the insurance company may find it suspicious and mistrustful. The insurance company will investigate to find out if the policyholder has provided accurate and proper information or not in the proposal form. The insurance company has all the rights to reject the death claim if death occurs during the contestability period of 2 years.

The Policyholder Missed To Appoint Or Update A Beneficiary Or A Nominee

If the policyholder missed to appoint or update a nominee or beneficiary details the claim might become jeopardized. This may cause a delay in the settlement of the claims of the policy or might also lead to denial of the claim in certain cases. The death claim under the policy is paid only to the nominee appointed in the policy and in the case no nominee appointed, the insurance company may reject the claim.

Non-disclosure Of Information About Any Previous Policy Held

If the applicant does not disclose or provide correct information about the policy that he/she already holds or has previously held, then the insurance company can reject the claim. Disclosing of all relevant information at the time of purchase of the policy is very crucial.

Conclusion

Every insurance company ask its customers to go through the policy documents before buying an insurance plan. There can be various term insurance claim rejection reasons. Hence, every insured is advised to check the reasons stated above before filing a claim and ensuring they fulfil the conditions as stipulated in the policy document to avoid the rejection of the claim and also read the policy document thoroughly and carefully.

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