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Know Reasons Why Term Insurance claim Can Get Rejected

Even though most of the term insurance companies emphasize the transparent and effective claim settlement process, the rejection of claims bound to happen. In some of the cases, it can be the fault of the insurance company, whereas in most of the cases the claim the rejected due to the ignorance/negligence of the policyholder.  Filing the claim does not guarantee that the claim will be settled and the nominee will receive the claim amount. In case of any discrepancy, the insurance company can reject the claim stating the reason for its rejection.

Further, in this article, we will elaborately discuss the most common reasons for the rejection of the term insurance claim.

Incorrect Information in the Application Form

While filing the claim form, it is very important that the beneficiary of the policy should fill all the information correctly. Any misrepresentation of information can be disadvantageous for a term insurance claim. The nominee should fill the details like income, age, occupation, lifestyle (drinking &Smoking), qualification, information of previous policies, and claims if any, and other required information carefully. Moreover, the beneficiary should also cross verify the information before submitting it to the insurance company.

Non- Disclosure of Medical History

While purchasing a term insurance policy, it is mandatory that the insurance buyer must disclose their pre-existing medical conditions. Any non-disclosure of medical history can affect the policy claim. The medical history of the insurance buyer plays a vital role in determining the premium rate of the policy. It is also important to disclose the habit that affects the longevity of the policyholder like consumption of tobacco or alcohol. Thus, it is very important that the insured should declare these details to avail of the claim rejection.

Not Updating the Information of the Nominee

In case of demise of the life assured, the life coverage is offered to the beneficiary or nominee of the policy. Thus, it is very crucial that the insured should keep the insurer updated about the details of the beneficiary such as their contact information, address, etc. In case of failure to do so can cause trouble in the process of claim settlement and can also lead to the rejection of term insurance claim.

Moreover, the insurance holder should also choose the beneficiary of the policy wisely. A married individual can choose their spouse and children as their nominee, whereas an unmarried individual can make their parents or any other family member the nominee of the policy. In case the minor is the nominee then it is compulsory to list a guardian as well.  

Not Filing the Insurance Proposal Form Yourself

Many policy buyers often sign a proposal form and blank check and hand them over to the agents for filling the details. However, there is no guarantee that the agent will know all about the health history of the insurance buyer, that of the family member or finance. Thus, to avoid any type of discrepancy, the insured must fill the term insurance plan by themselves. This will also help the insured to have a better understanding of the term insurance policy and zero in on a plan that best suits their requirement.

Lapse of Policy Due to Non-Payment of Premiums

The insurance company settles claims only for active insurance policies. Thus, the insurance holder should always pay the premium of the policy on time. In case all the premium of the policy is fully paid, then the insurance company will easily process the claim in case of an eventuality. It is advised that the insured should check the premium payment status of the policy from time to time to ensure that the premiums of the policy are paid.

Non- Disclosure of Existing Insurance Policies

While purchasing a new term insurance plan the insured must disclose the details of all the existing term insurance policies (such as sum assured, name of the insurer, and policy number). Sometimes, the policy buyer avoids mentioning this information only because they find it burdensome to go through old documents to recover the specific details. Hiding such information can also become one of the main reasons for the rejection of the claim.

Wrapping it Up!

To avoid the situation of claim rejection, it is very important to check the claim settlement ratio of the insurance companies before zeroing in on a plan. So, by keeping in mind the above-mentioned points, one can not only safeguard the future of their loved ones but can also ensure that they get all the benefits of the policy as planned.

Written By: PolicyBazaar - Updated: 04 February 2021
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