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What are the Term Insurance Claim Rejection Reasons?

Ever wondered what would happen if your term insurance claims get rejected? There would be grief of losing a dear member coupled with an unfading stress for upcoming financial liabilities. These could bring your family's world upside down. You certainly don't want to go through such adversities at an already adverse time, so you must try to prevent this horrific scenario from arising. As a policy buyer, you need to understand the reasons held responsible for rejecting a claim.

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What are the Reasons for Rejection of Term Insurance Claims?

The following points are some of the main term insurance claim rejection reasons:

  1. Not Filling the Proposal Form Yourself

    Many clients tend to provide a blank cheque and a proposal form to their advisor, leaving them to complete the details. Even if the advisor is well-informed, they may not possess a comprehensive understanding of your health, financial situation, and that of your family members. Taking responsibility for completing the term insurance plan application yourself is essential. This not only enhances your comprehension of the life insurance policy but also enables you to select the most suitable features that align with your family's requirements. Therefore, 

  2. Giving Incorrect or Incomplete 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. Specify the Nature of your Job

    There are jobs that carry no risks, but then there are also jobs that are high risk or are life threatening. Jobs like working in a mine, fire fighting, etc. involve high risks. The nature of jobs must be communicated to the insurer before you buy term plan. The insurer may reject your term insurance claim if the job type is not accurately conveyed.

  4. Not disclosing medical history

    One of the most common reasons for rejection of term insurance claims is the non-disclosure of the medical history of the family. Ensure that you give out all the necessary facts regarding your and your family's medical history. It is also important to disclose the conditions that may have affected your family members in the past like, cancer, diabetes, or any other serious conditions. 

  5. Not Providing Medical Test Details

    The top life insurance companies in India request a medical test for accurate condition of the life assured. This promotes transparency and ensures that the insurer is aware of all the pre-existing conditions of the life assured. Here, you should also mention all of your habits that affect your longevity, such as the consumption of alcohol and tobacco. Be very clear in declaring these details to avoid term insurance claim rejected.

  6. Policy Lapse Due to Non-payment of Premiums

    One of the most common reasons for rejection of term insurance claims is the lapse of the term insurance policy. Many people don’t realise that their term insurance policy has lapsed due to late or non-payment of premiums. This means that the policy essentially does not cover the life assured. If the nominee files a term insurance claim while the policy is still lapsed, the term insurance application is rejected.

    Therefore, to avoid lapse of term insurance policy, insurers offer a few days as a grace period in case you fail to pay the premiums on the due date. The insurer will pay the claims if the policyholder dies during the grace period. Not only that, but the insurance companies also offer a chance of revival of lapsed life insurance policies within the revival period, which allows the policyholder to get continued coverage within the same plan.

  7. Not Disclosing Old 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.

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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 top 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.

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Wrapping it Up!

It's better to be safe than sorry. You must be very honest and transparent while signing up for term insurance, especially when you are filling the proposal form. Not disclosing the eminent details could land you in huge trouble. Don't let your efforts and money go to waste. Be very vigilant while buying term insurance, and give out as many details as possible. Be secured and assured!

FAQs

  • Q: Is is possible to buy term plans without medical tests in India?

    Ans: Many life insurance companies offer term insurance plans without a medical exam. In these term plans, the policyholder is not required to pass any medical test while buying the policy. Considering the age of the policyholder and the sum assured amount chosen by them, the insurance company may not request the insurance holder to undergo the medical exam. However, if the policyholder has some pre-existing medical problems or illnesses, then they will have to go through the medical test while purchasing the policy.
  • Q: Does term insurance offer coverage against coronavirus as well?

    Ans: Yes, term insurance offers coverage against COVID-19 as well. In the world of actualities, eventuality does not come with prior notice. In a crucial phase of a novel coronavirus, the loss of the breadwinner of the family can be challenging and distressing mentally, emotionally, and financially as well. Therefore, make sure that you have coronavirus life insurance, which will be helpful in such an unfortunate situation. Moreover, it is of utmost importance that your insurer is immediately informed in case of any unfortunate incident. Giving correct information is important to avoid your term insurance claim from being rejected in the long run.
  • Q: Why are term insurance claims rejected?

    Ans: Term insurance claims can be rejected due to misinformation or non-disclosure of information, not providing accurate current and family medical history, policy lapsed due to non-payment of premiums, not updating nominee details, and not disclosing other policy details.
  • Q: How do I stop my term insurance claim from rejection?

    Ans:You can stop your term insurance claim rejection by:
    • Offering accurate information
    • Informing of other life insurance policies
    • Updating nominee details
    • Regularly paying premiums
    • Disclosing medical history
  • Q: What are some of the most common reasons for term insurance claim rejection?

    Ans:
    • Providing Inaccurate Information in the Application Form
    • Failing to Disclose Medical History
    • Allowing Someone Else to Complete the Insurance Proposal Form
    • Neglecting to Update Nominee Information
    • Policy Lapsing Due to Failure to Pay Premiums

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