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Reasons for Life Insurance Claim Rejection

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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7 Reasons Why Life Insurance Claims Are Rejected

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:

  1. Non-Disclosure or False Information

    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.

  2. Lapse in Policy

    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.

  3. Not Appointing or Updating Nominee Details

    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

  4. Undisclosed Medical Tests

    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.

  5. Policy Exclusions

    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. 

  6. Hiding Other Insurance Policies

    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.

  7. Delay in Filing for Claim

    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. 

Things To Keep In Mind To Avoid Life Insurance Claim Rejection

Here are a few points to keep in mind to avoid rejection of life insurance death claim:

  1. Full Disclosure of All Details:

    Provide accurate and complete information during the application process to avoid claim issues due to non-disclosure.

  2. Timely Premium Payments:

    Ensure timely payment of premiums to prevent policy lapses, which could further lead to claim rejection.

  3. Nominee Updates:

    Regularly update nominee details to avoid complications during the claim settlement process.

  4. Understand Exclusions:

    Read and understand policy exclusions to prevent claims related to excluded events.

  5. Accurate Policy Review:

    Review and update your policy regularly to reflect any changes in your life circumstances and ensure continuous coverage.

Wrapping it Up!

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.

FAQs

  • Why life insurance claims are rejected?

    Ans. Life insurance claims are rejected due to false information, the lapse of the policy, undisclosed medical history, un-updated nominee details, and hiding other existing policies. Apart from the above reasons, another life insurance claim rejection reasons is that the policyholder was involved in criminal or illegal activities due to which he/she suffered an unfortunate death. This may lead to the life insurance claim rejection.
  • Q. On what grounds can an insurance claim be rejected?

    Ans. The insurance claim can be rejected for a variety of reasons the policyholder’s death due to reasons excluded in the policy, nondisclosure of existing medical conditions, and providing incorrect or misinformation. You should always take a thorough look at the policy documents to get a better understanding of the life insurance claim rejection reasons.
  • Q. Can insurance company reject death claim?

    Ans. Yes, the life insurance company can reject the death claim of the nominee in case the policyholder dies due to any of the reasons not covered under the policy benefits or was unable to pay the premiums on time leading to the lapse of the policy.
  • Q. What to do if my claim is rejected?

    Ans. If your life insurance claim is rejected, you need to understand the reason behind why the life insurance claim was rejected. Then get in touch with the insurer to better understand how you can get your claims settled. If you think the insurer is rejecting your valid claim, file a complaint with the IRDAI and wait for 30 days. The IRDAI will review the claim and help your claim be settled if they find the claim to be genuine. If nothing works, you can contact the consumer forum or court to get your life insurance claim settled.
  • Q. What are policy exclusions, and why should I understand them?

    Ans. Exclusions are events not covered by the policy. Understanding them prevents claims related to excluded events.
  • Q. Why is full disclosure important when applying for life insurance?

    Ans. Full disclosure ensures accurate information, reducing the risk of claim rejection due to non-disclosure issues.
  • How to calculate the term insurance premium online?

    Ans: You can easily calculate the term insurance premium online by using the term plan calculator online tool
  • What are the benefits of term life insurance?

    Ans: Here are 4 common benefits of term insurance:
    • Low premium rates
    • Tax Benefits
    • Death Benefit
    • Long term coverage
  • What are the benefits of term life insurance?

    Ans: Below mentioned are the key features of a best term insurance policy in India:
    • Affordable premium rates
    • Long-tenure life protection
    • Easy to understand and buy
    • Riders availability
    • Whole life protection
    • Tax benefits
  • What are the key features of a best term insurance plan in India?

    Ans: Let's understand what is term life policy here. Term insurance offers financial protection for a certain period to the policyholder, thereby, offering a lump sum payout if the policyholder unfortunately passes away during the policy term.

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