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Life insurance plans offer the combined benefits of long term protection and the chance to build wealth for your future. These plans payout a death benefit on the policyholder's death during the policy term, whereas, if the policyholder survives the policy tenure, the insurer pays out the sum assured at maturity. But even though life insurance plans provide coverage against various kinds of deaths, there are some reasons why your family’s claim might be rejected in the event of your untimely demise.
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Here is a list of all the reasons for life insurance claim rejection that you should be aware of to avoid your family’s claim being rejected in their time of need.
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Before filing claim papers, you need to be aware of the life insurance claim rejection reasons. The most common reasons why claims are rejected are as follows:
Providing wrong or no information is one of the most common life insurance claim rejection reasons. The logic behind this is quite simple, the premium and risk coverage is determined by personal details like age, profession, health condition, medical history etc. If the company checks the details and believes there is any misrepresentation, the claim could be denied.
Therefore, as a responsible buyer, it is important to provide the correct information, such as any pre-existing medical condition in the insurance form to avoid any claim rejection in case of death due to that disease only. Sometimes there can be a possibility that the insurance company has by mistake put a wrong detail, so it is wise to check the policy documents as soon as you receive them and inform the insurance company in case of any mismatch.
One of the most common life insurance claim rejection reasons is the lapse in policy due to non-payment of premiums. A lot of the time, policyholders unintentionally fail to pay the premiums for their life insurance policies. This could be either because of forgetting about the premium payment or because of insufficient funds. If the policyholder does not pay the premiums even within the grace period, the policy will lapse. And in such cases, if the policyholder dies while the policy is in lapse, the policy will not offer any death benefit payout to the nominee of the policy, and thus the policy claim is rejected.
Life insurance plans provide the death benefit to the nominee of the policy in case of the policyholder’s unfortunate death during the policy term. But, in case there is no nominee appointed during the policy term, the insurance company will transfer the amount to the next of kin. This means they will payout the benefit amount to the family/heir of the policyholder.
However, if there is no nominee appointed and the legal heir to the amount is undecided, the claimant would have to submit a series of documents to prove their relationship with the policyholder. This can be a lengthy process which is one of the life insurance claim rejection reasons. Thus, it is always better to keep the nominee or beneficiary details updated for your life insurance policy to ensure a smooth, easy, and quick claim settlement.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
The insurance provider verifies every medical detail filled by the applicant, especially in case of high age or high risk coverage. Most insurance companies conduct medical tests for the same. You should not avoid submitting these tests, as one of the life insurance claim rejection reasons is that the insurer may claim the death is due to a pre-existing condition. It is always wise to go for the medical tests so that you can spot any pre-existing illnesses and the company can provide coverage for these conditions. This will also reduce the chance of rejection during claim as the medical tests have already been performed.
Every insurance provider states a specific list of conditions under which all the life insurance claim rejection reasons are stated. This means the life insurance will not provide the death benefit on death due to any of the reasons listed in the ‘Exclusions’ section. Some of them are suicide, drug overdose, and death by accident under intoxication. Death due to any of these reasons is bound to be rejected as they do not come under a valid claim category as per the insurance companies.
One of the questions an insurer asks before offering you a policy is if you already have any existing life insurance plan coverage. This is because the life cover of the previous policy will impact the amount of the sum assured you are eligible to purchase as per your current human life value.
Let us understand with an example:
Suppose you are a 25-year-old adult with an existing 1 crore term insurance. If your current annual income is 10 LPA, then according to the human life value calculator, you are eligible to buy life insurance policies worth Rs. 1.5 Crore. So if you were planning on buying life insurance for 2 crores, you could only buy a policy of a maximum of 1.5 Crores life cover.
Thus it is always better to disclose all types of life insurance plans that are active when purchasing a new policy to ensure your family’s life insurance claim rejection reasons don’t come in the way of their financial freedom at the time of your unfortunate death is settled.
If the nominee delays in filing for a claim, it can be one of the life insurance claim rejection reasons, as in case of the policyholder’s death, the insurer would want to investigate the cause of the death themselves and check if the death was due to natural or accidental causes. Thus to avoid your life insurance claim from being rejected, you should always inform the insurer of the policyholder’s death as soon as possible.
Here are a few points to keep in mind to avoid rejection of life insurance death claim:
Provide accurate and complete information during the application process to avoid claim issues due to non-disclosure.
Ensure timely payment of premiums to prevent policy lapses, which could further lead to claim rejection.
Regularly update nominee details to avoid complications during the claim settlement process.
Read and understand policy exclusions to prevent claims related to excluded events.
Review and update your policy regularly to reflect any changes in your life circumstances and ensure continuous coverage.
Life insurance can provide you with the peace of mind of knowing your family will be taken care of in your absence. These plans provide maturity benefit in case of survival and death benefit in the event of your untimely death. However, there are some life insurance claim rejection reasons that can get your family’s claim rejected. You can learn all about why life insurance claims are rejected to avoid your family’s claim from being rejected in their time of need.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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