Hence, it is essential to get a comprehensive understanding of the factors leading to claim rejections and proactively address the common issues which may contribute to term insurance claim denials.
Common Term Insurance Claim Rejection Reasons
Let us take a look at some of the common term insurance claim rejection reasons so that the beneficiaries can save themselves during the need of the hour:
1. Non-disclosure of material information by policyholder
Term insurance is an agreement between the policyholder and the insurance provider1. It is based on the principle of utmost good faith wherein you are required to inform the insurer about every important fact that might affect your mortality risk. If you withhold or hide the material information during the application, you breach the principle of utmost good faith. In such cases, the insurer can reject your claim and suspend the benefits of your term insurance policy.
2. Incorrect or incomplete information
Providing incomplete or inaccurate details can also be one of the term insurance rejection reasons. Disclosure of all material information such as age, medical history, information about current or previous insurance, personal habits, income, etc. is significant to safeguard the policyholders from delays or rejection of claims. It's vital to thoroughly confirm, review and verify all the details and information before applying to ensure its accuracy.
3. Non-disclosure of any previous insurance policy
Disclosure of your previous and existing insurance policy is also essential at the time of application for a complete risk assessment by the insurance provider. Hiding or withholding the details of your existing insurance policies can result in claim rejections.
4. Nominee details may not be up-to-date
If the nominee details are not up to date, an insurance company may ask for additional documentation for substantiation of claims by legal heirs. However, if legal heir cannot be decided to their satisfaction, an insurance company may reject the claim altogether. Hence, it is necessary to regularly review and update nominee information to ensure that the intended beneficiaries receive the benefits of the policy without any hindrance.
5. Hiding or lying about critical illness
Providing false information or concealing critical illnesses intentionally can also be a term insurance claim rejection reason. True and correct disclosure about your existing health conditions is important to comply with the principle of utmost good faith.
6. Late payment of premiums
Timely payment of premiums is necessary to keep your policy active. Late or delayed premium payments can lead to policy lapses, rendering the benefits void.
7. Undisclosed lifestyle choices
The policyholder at the time of application should also inform the insurer about their lifestyle habits which can take a toll on their health and may increase the risk involved. Lifestyle habits such as smoking, drinking, unhealthy eating habits, and adventurous sports are material facts which should be disclosed to the insurer. This will help the insurance provider to assess the individual’s case better. If kept undisclosed, such information might also lead to rejections of claims as it is another ground for a breach of the principle of utmost good faith.
How to Ensure Your Term Insurance Claim Is Not Rejected?
Ensuring that your term insurance claim is not rejected requires adopting proactive measures and ensuring careful adherence to the terms and conditions of the policy. Here are some key points to keep in mind for ensuring a successful and smooth term insurance claim settlement:
1. Disclose your medical history
Medical history forms a vital parameter for the issuance of term insurance as the coverage and premium of the term plan are decided on the medical history of the policyholder. To avoid claim rejections, provide complete information about your pre-existing health conditions, and medications. Maintain regular health checkups and promptly report to the insurer any instances of changes in your medical condition. You must also disclose your lifestyle habits if any, such as alcohol habits or smoking to maintain transparency and ensure smooth claim settlement.
2. Provide complete and correct information
Fill your application with complete, accurate and updated details. Ensure to check your application meticulously. You can also seek guidance from your insurer if you need any clarification on any aspect or terms of the policy. Communicate and update any changes in the details provided to the insurer promptly as and when occur. Open and consistent communication with your insurer helps you to smoothly process your claim.
3. Nominee details not updated
Not having an updated nominee may cause hassles at the time of claim settlements. In the absence of a nominee, an insurance company shall pay out the claim, according to the Indian Succession Act, 19252. Hence, ensure to regularly review and update your nominee details.
4. Ensure that your policy remains active
Keeping your policy active is one of the prerequisites to enjoying coverage. Ensure to make timely payments of your premiums, set reminders or authorise automatic payments to avoid unintentional lapses which can jeopardize the benefits.
Conclusion
Preventing term insurance claim rejections demands upfront disclosure and honesty, ensuring timely adherence to payment obligations, and getting a clear grasp of the terms and exclusions of your policy. By staying vigilant and maintaining transparency you can enjoy a hassle-free and swift claim experience when it matters the most.
FAQs
● How to prevent claim rejection due to non-disclosure?
To prevent claim rejection due to disclosure, provide all material and relevant information to the insurance company when you are buying the term insurance policy. Also, if you are reviving a lapsed term plan, inform the insurance company about any changes in your lifestyle or health conditions which might affect your mortality risk.
● Can I appeal if my claim is rejected?
You can make an appeal to the insurance company if your claim is rejected. Know the reason for rejection and approach the grievance redressal cell of the insurance company. If you are unsatisfied with the insurer’s resolution, you can also approach the insurance Ombudsman and appeal rejection.
● What should I do if my claim is rejected?
If your claim is rejected, find out the reason for the same. If the reason is something that can be resolved, seek a resolution. For instance, if your claim is rejected due to incomplete documents, you can submit the pending documents and get the claim settled. However, if the reason is something for which no resolution is available, the chances of claim settlement will be less. For instance, if your policy was lapsed, no claim would be payable under it and you wouldn’t be able to get a claim settlement. For other reasons, you can raise a dispute with the insurance company.
Sources
1. https://economictimes.indiatimes.com/tdmc/your-money/these-are-the-participants-in-your-insurance-contract/tomorrowmakersshow/60490992.cms?query=Insurance
2. https://www.sabsepehlelifeinsurance.com/dependents-or-nominees#:~:text=So%2C%20even%20if%20you%20happen,%2C%20son%2C%20daughter%20and%20mother.
Information Gathered from
https://bfsi.economictimes.indiatimes.com/news/insurance/why-term-plans-can-get-rejected-and-how-to-solve-claim-rejection-issues/100527445
https://www.livemint.com/money/personal-finance/avoiding-common-pitfalls-understanding-how-to-avoid-term-insurance-claim-rejections-and-settling-grievances-with-insurers-11683201102662.html
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