Term insurance offers financial security to your loved ones when you are no longer around. Many people choose term life insurance policies as they offer significant coverage with affordable premiums as well as tax benefits. However, facing a term insurance claim rejection can be highly distressing. This is more so because the policyholder is no longer there to address the issues and may be the main financial provider for the family. It is important to understand the common reasons for which a term insurance claim may be rejected.
Common Pitfalls Leading to Term Insurance Claim Rejection
Are you considering term insurance? Knowing the reasons for claim rejection can protect your loved ones from facing hassles after you are gone.
Non-disclosure of pre-existing diseases: When taking a life insurance policy, it’s important to be completely honest about your health status. Hiding a medical condition can lead to term insurance claim rejection.
Non-disclosure or misrepresentation of material facts: Apart from your current medical condition, it’s also important to provide all information about your lifestyle, occupation, income, and family history. These factors play a role in the insurer’s risk assessment and premium calculation. If the insurer finds out that you deliberately hid some relevant information, the insurance claim may be rejected on the grounds of fraud or breach of contract.
Delay in payment of premiums: Delayed premiums can lead to your term insurance claim rejection. Most insurers offer a grace period, which could be up to 30 days. If you delay paying premiums beyond this, your policy is considered as lapsed, and your beneficiaries will face claim rejection. You may set up auto-debit from your bank account to ensure timely payment of premiums.
Death due to exclusions: It’s important to read the policy document carefully, as it may have some exclusions. For instance, the policy may not cover death due to riots, natural disasters, suicide, drug abuse, alcoholism, or even adventure sport like paragliding, bungee jumping, or motor racing. If the insured person dies due to causes mentioned as exclusions in the insurance policy, the claim will be rejected.
Inaccurate beneficiary details: If you fail to mention the name of your beneficiary correctly or miss updating the nominee details in case of the premature death of the previous nominee, the insurance claim may be rejected by the insurer.
Delayed or incomplete claim submission: At times, insurance claims are rejected if the beneficiary takes too long to submit the claim. A copy of the death certificate of the policyholder is necessary when filing a claim for life insurance. The insurer may require some other documents as well, including identity proofs of the policyholder and the beneficiary. Missing documents can also lead to term insurance claim rejection.
Some other reasons for term insurance claim rejections are:
Nominee having a direct or indirect role in the death of the policyholder.
Death during childbirth, in case the policyholder was pregnant when taking the policy but missed disclosing this.
A term insurance claim rejection can be highly distressing. To avoid common pitfalls that lead to rejection is essential, especially when the policyholder is the main breadwinner of the family. A key aspect to keep in mind throughout the process is to have all documents ready. In case an insurance claim has been rejected and there is a feeling that the insurer has not provided a valid reason, you may contact the grievance redressal officer and present your case and try to resolve the issue.
