What are the Term Insurance Claim Rejection Reasons?

Can a Term insurance claim be Rejected?

Yes, your term insurance claim can be rejected. Sometimes, you do not receive a death benefit from your family’s insurance coverage. The main reason is that when complete details are not provided to the insurer, or if the life assured fails to pay premiums and then the policy lapses. 

Another reason for rejecting a claim is submitting a claim for a life event listed under the ‘Exclusions’ section. 

Following is a list of some common examples which are excluded from term insurance coverage: 

• The policyholder’s death was due to pre-existing health conditions that were not disclosed. 

• The death of a policyholder where a nominee plays an important role. 

• The death of a policyholder because of some adventurous activities including racing, riding, paragliding, and others. 

• The death of a policyholder is because of consuming excessive alcohol or drus. 

• The policyholder’s sudden death during the birth of a child when pregnancy news was undisclosed. 

What are the Most Common Reasons for Rejection of Term Insurance Claims?

Here are some of the common term insurance claim rejection reasons:

1. Not Filling the Proposal Form Yourself

   Clients often hand over a blank check and proposal form to an advisor, trusting them to fill in the details. However, no matter how trustworthy the agent may be, they cannot fully understand your health history, financial situation, or family. It’s important to take responsibility and complete the term insurance application yourself. Doing so ensures accuracy and helps you better understand the life insurance policy and select the features that best meet your family’s needs.

2. Incorrect Information in the Application Form

   Providing inaccurate information on your life insurance application can have serious consequences for your life insurance claims. It's crucial to carefully and accurately fill in details like age, income, occupation, education, lifestyle habits (such as smoking and drinking), as well as information regarding prior policies and claims, if applicable. These factors significantly impact your premium. Any errors or omissions in this data can be considered fraudulent and result in the forfeiture of policy benefits.

   Therefore, you must provide all the correct and exact information about your existing insurance policy details to avoid term insurance claim rejected in future.

3. Missing information of Nominee/Beneficiary

   A beneficiary/nominee is a person who gets the death benefit of a life assured. Thus, you should ensure to keep your insurance plan updated on nominee’s address, contact details, and other information. Doing this can interfere the claim process and leads to the term insurance rejection reason.

   Thus, you should choose your nominee smartly. In case you are married, you can nominate your spouse or your children, whereas in case you are single, it is suggested to nominate your parents or close relatives. If the nominee is minor, it is important to mention a guardian’s name.

4. Not disclosing medical history/test details or current medical conditions

   One of the leading term insurance claim rejection reasons is the failure to disclose complete medical history or current health conditions.The life insurance companies in India request a medical test for accurate condition of the life assured. Insurers require full transparency about your and your family's medical background, including serious illnesses like cancer or diabetes. Additionally, not providing accurate details during mandatory medical tests—such as omitting habits like smoking, alcohol, or tobacco use—can lead to term insurance rejection. Always be honest and thorough while sharing medical information to avoid claim issues in the future.

5. Policy Lapse Due to Non-payment of Premiums

   Claims are settled only for active insurance policies. If you miss paying the premium, the policy will lapse after the grace period, typically up to 30 days for annual premium policies. The insurer will pay the claims if the policyholder dies during the grace period. Not only that, insurance companies also offer a chance to revive lapsed life insurance policies within the revival period, allowing policyholders to get continued coverage within the same plan.

   When this happens, all previously paid premiums are forfeited. Consider setting up direct debit facilities to avoid this to ensure timely payments. If a policy lapses, you can attempt to revive it by paying the required fees. Securing your family’s future is worth the effort.

   Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying the plan.

6. Not Disclosing Existing Insurance Policies

   A lot of people who buy more than one insurance policies unaware of the necessary policy declaration rule, they need to disclose their existing policies to the new company. However, it is absolutely necessary to declare your prior insurance policies. Regardless of how much your policy sum assured is, you have to disclose your previous policies before taking a new life insurance policy (This means Term plan, ULIPs with insurance cover, and Traditional Policies). Not disclosing information about pre-existing life insurance plans can lead to term insurance claim rejection in the long run.

   *All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

   Note: Know what is term insurance first and then buy a term plan for your loved ones.

How to Avoid Term Insurance Claim Rejection?

Here is a list of ways on how to avoid term insurance claim rejection:

• Disclose all the Information Carefully and Correctly: This means you need to provide all the documents and information on the policy form accurately to the best of your knowledge. Lying while applying for a policy can be a reason why term insurance claim is rejected.

• Provide Updated Personal and Family Medical History: You need to provide all the information regarding any pre-existing illnesses or conditions that may run in the family, along with supporting documents. This is to avoid your term insurance claim rejected.

• Fill out the Proposal Form Yourself: This allows you to make sure all the information you fill in on the proposal form is correct to the best of your knowledge. Letting your agent fill out the form might make mistakes.

• Pay Premiums on Time and Avoid Policy Lapse: Pay all your term insurance premiums on time to ensure your policy does not lapse. A lapsed term insurance policy is one of the term insurance claim rejection reasons. 

• Regularly Updating the Nominee Details: You should not only make sure that you responsibly appoint the appropriate nominee for your term insurance policy, but also ensure that the updated details like name, contact number, and email IDs, are also updated in your policy. This ensures that the insurer is able to verify the right nominee and avoid any reasons for rejection of term insurance claims.

Wrapping it Up!

It's better to be safe than sorry. You should be very honest and transparent while signing up for term insurance, especially when filling out out the proposal form. You need to disclose the important details to avoid getting in huge trouble. Don't let your efforts and money go to waste. Be vigilant while buying term insurance, and give out as many details as possible. Be secured and assured!

Note: Check out the best term insurance plan in India and choose one that suits your requirements.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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