What to do When a Life Insurance Claim is Rejected?

Understanding why claims get rejected can help you avoid common mistakes. Let's look at the key reasons for claim rejections in India and how to prevent them.

Why are Life Insurance Claims Rejected in India?

The complaint and response letter of the life or term insurance company can be used to find out the reasons why your claim has been refused. More simple disputes may be resolved, or incorrect decisions may be overruled when the matter is considered from a fresh perspective. You may also use the also premium payment mode to explain the reasons behind the original decision and understand why the claim was rejected. 

What are the reasons for Life Insurance Claim Rejection?

Here is a list of top reasons for life insurance claim rejection in India: 

• Policy Lapsation: Premiums are to be paid on important, timely premium payments that will help your policy remain active and cover the policyholder. Most insurance companies provide a grace period of 15 or 30 days, depending on their preferred premium payment mode.

• Insufficient Conditions: Understanding what is term life policy is essential as it can help avoid insurance claim rejection. Generally, insurers refuse claims due to the policyholder not fulfilling the legal conditions.

• Suicide Clause: Sometimes, the insurer or company will refuse to pay the insurance amount. This mainly happens in cases where suicide within a specified period is an exclusion under the life insurance. The insurer may refuse to repay the life insurance claim on the suicide of the life assured within a specified period, generally 1 year.

• Proper Nominee Details: Proper documentation is one of the primary reasons that an insurance claim could be rejected. The following points should be covered & all paperwork should be duly made in writing and duly signed by the nominee, 

  • Name of the insured 

  • Policy number 

  • Date of death 

  • Cause of death

• False or non-disclosure of Information: Violation of good faith,insurance companies enter into long-term contracts with their clients. Hence, accurate data regarding age, health, financial conditions and other aspects must be provided when filling out the policy forms.

What to do if Life Insurance Claim is Rejected?

• Understand the Rejection

  Start by reviewing the rejection letter sent by the insurer. It should mention the reason for the claim denial. Common reasons include non-disclosure of medical history, misrepresentation facts, or policy lapse due to unpaid premiums. Understanding the root cause helps you decide the next course of action.

• Gather Supporting Documentation

  Collect all relevant documents such as the death certificate, original policy papers, claim form, and medical records. Ensure the documents are accurate, complete, and aligned with the information submitted initially to avoid further complications.

• Internal Grievance Redressal

  If you believe the rejection is unjust, file a complaint with the insurer's Grievance Redressal Officer (GRO). Follow their official grievance process and submit all supporting materials. You can also consider professional help from a lawyer or insurance advisor to strengthen your appeal.

• Escalation

  If the insurer's response is unsatisfactory, escalate the matter.

  • Use the IRDAI's Bima Bharosa portal to register a formal complaint.

  • For claims up to ₹50 lakh, you can approach the Insurance Ombudsman.

  • For higher claim amounts or unresolved disputes, the consumer court is another legal route.
    If needed, you can also explore legal action through civil courts.

• Important Considerations

  Be aware of the contestability period, usually the first two years of the policy, during which the insurer can scrutinize claims more closely. After this period, Section 45 of the Insurance Act restricts claim rejection unless fraud is proven. Always maintain transparency and ensure all policy details are accurate from the start.

How to Avoid Life Insurance Claim Denials? 

If you or someone you care about has life insurance, there are a few things to do to make sure everything goes smoothly when the time comes to claim it: 

• Set up automatic payments so you don't miss a payment and lose your coverage.  

• When you get the insurance, be honest about your health and hobbies. Don't hide anything.

• Keep your policy information up to date. After big life changes, update who gets the money and ensure their contact information is correct.  

• Tell your beneficiaries you have life insurance, show them where to find the paperwork, and explain how they can claim the money.

Final Thoughts

Rejection of a life insurance claim can impact the policyholder's and the nominee's lives. In case of a maturity claim rejection, the policyholder can lose their retirement money, whereas, in case of a death claim rejection, the family may financially suffer in the absence of the policyholder. Therefore, you must avoid all the reasons for rejection of life insurance and know what to do if your life claim is rejected.

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