Why Do Term Insurance Claims Gets Rejected?

There is nothing more painful than the grief of losing a loved one to sudden and untimely death. This coupled with unforeseen financial stress can aggravate the suffering. Having term insurance in place helps. However, in certain instances, life insurance companies may reject the term insurance claims made to them. This fact may seem odd in the light of the fact that each term insurance company promises an easy and hassle-free claim settlement ratio. Higher the term insurance claim settlement ratio, greater the chances of your claim getting accepted.

Instances of term insurance claim rejection are not uncommon. Though the rejection may be because of an erroneous decision taken by the insurance company, in most cases claims stand rejected owing to ignorance or callous attitude of the policyholders concerned. Rejection of term life insurance claim can be hard-hitting and, hence, it is important to understand the reasons responsible for it.

Being Careless While Filling in Details

It is common for customers to skip reading the details and necessary terms & conditions published in the insurance form. Most of them rely on agents affiliated with the insurance companies of India to fill the forms on their behalf, thus, relieving themselves from the task of filling out the form. Paying off premiums for insurance is not enough. Moreover, while buying insurance offline, insurance agents tend to miss out on filling important details of their clients including their medical history or put to paper any necessary information that can affect the insurance claim in the long run.

Many people believe that paying for insurance is enough to ensure financial security to their family. The possibility of insurance claim rejection is a fact that many policyholders fail to realize. Many people realize the significance of term insurance as a financial instrument and buy it to secure the future of your loved ones. However, it is also important that all the requisite details published in the proposal form are filled carefully and a copy of the same kept for further validation, if and when required. In case of any discrepancy between the details submitted and those received in the policy document, it is important that the customer approaches the concerned insurance company and get them rectified.

Submission of Incorrect Details in the Proposal Form

Customers with smoking or drinking habits have to spend more on premium payments compared to those with healthy lifestyle habits. Also, most people fear to disclose details about any pre-existing medical illnesses for fear of the insurance company refusing to sell them insurance. However, one must realize that any insurance contract is based on the “Principle of Utmost Good Faith”, which implies that the contract must be signed between the insurer and the insured in absolute good faith. Customers must ensure that they fill incorrect details including their names, age, gender, income, occupation, medical history and lifestyle habits in addition to details while buying a term insurance policy.

Abstaining From Participating in Medical Tests

The insurance company issues the policy after evaluating the risk profile of the customer. However, the insurer assesses the level of risk based on the details shared in the proposal form. It is mandatory for customers seeking a higher amount of sum assured to undergo some necessary medical tests. Refraining from appearing in those tests could result in increased chances of claim rejection.

False details about the nature of the job

Every job comes with a different risk profile. Certain jobs carry no risk at all whereas there are others that may pose a risk to life. While applying to buy an insurance policy, it is important that you reveal the nature of your job so that the insurer may assess the risk involved before issuing the policy document. Incorrect details about the nature of the job may lead to claim rejection.

Not Disclosing Details About Old or Existing Insurance Policies

As per the guidelines of the Insurance Regulatory Development Authority of India (IRDAI), it is compulsory to share details about any previous policy bought from any insurer while buying insurance from your current insurance company. Most people are not aware of this rule, and hence, miss out on sharing details of any policies they may have bought prior to this. There are others too who refrain from sharing details fearing that disclosing details might affect the current insurance company’s decision to issue the policy.

Policy Lapse

One cannot claim on a lapsed policy. A policy is considered lapsed when it ceases to exist. Inability to pay premiums towards your term insurance plan on or before the due date may result in the lapse of the policy. Though many insurance companies allow their customers grace period to make their premium payments, the inability of the same results in policy lapse. The existing policyholders would be required to renew the term plan insurance within the grace period so that their loved ones may claim on the same, if and when required. One cannot file a claim for a lapsed policy, hence, timely payment of premiums is advisable.

Buying term insurance means that you are entering into a contract with an insurance company to ensure a financially secure future to your loved ones. Filling in necessary details on the policy proposal form is, therefore, important if you wish to ensure hassle-free claim settlement in favor of your loved ones. The insurance company, as per the terms of the policy, would be liable to pay off the predetermined amount of sum assured to your nominee(s) in return for regular premium payments in the event of your unfortunate death during the policy period. However, buying an insurance policy does not guarantee claims to your dependent(s) unless you meet their requirements.