6 Obvious Reasons for Term Insurance Claim Rejection

By Neha Goyal
  | Published: 23 April 2020 | Last Updated On: 21 June 2021

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Term insurance claim rejected? Is it not the worst thing that could ever happen to your family members when you are no longer in this world? Find out 6 obvious reasons for claim rejection by your insurer.

Someone has well-said, “Life is hard but death is even harder”.

You take your last breathe peacefully because you know you’ve already done all that you could for your loved ones back there.

Being the sole breadwinner of your family, you purchased a term life insurance policy in order to offer financial protection to your family members. After all, you would never want your spouse and children to compromising in living a comfortable life even where you are not around.

But you’re wrecked right up there, by watching your loved ones run after the life insurance company because the insurer rejects your death claim.

Well, yes, you might feel very bad by seeing this because you remember how the life insurance company emphasis you for their smooth and hassle-free term insurance claim settlement process.

What could have been the most possible reasons for your insurer to reject your insurance claim?

Do you have any idea?

Let’s find out some common reasons that lead to the term insurance claim rejection.

Common Reasons Why Term Life Insurance Claim Get Rejected

1. Inaccurate Information in the Application Form

While proceeding further for the claim settlement process, make sure you provide all the accurate information to the life insurance company. Reason being, misrepresentation of details can be one of the key reasons for claim rejection of your term insurance policy.

Fill your details such as age, income, qualification, occupation, information on previous insurance policies, lifestyle (drinking/smoking), claim (if any), and other important information in the application form correctly and carefully to ensure the maximum transparency between you and your life insurance company. Please note that all of these are the vital factors in deciding your insurance premium. Incomplete or wrong data can also constitute fraud as well as lead to suspension of your term insurance policy benefits.

2. Providing Incorrect Information about Employment

Life Insurance Companies declare some specific list of jobs in their insurance policy’s terms and conditions that come under certain professions those people are considered as high-risk individuals. This includes jobs linked to the hazardous environment. So, if, in case, you are into one of those professions mentioned in the portfolio, then you will need to reveal the same. If you hide from your insurer, then chances are high that your term insurance claim might be rejected in the future.

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3. Not Updating the Information of Nominee Accurately

Upon the demise of the insured, the sum assured as death benefits are paid to the nominee by the life insurance company. Therefore, it is imperative to keep the insurer updated transparently about the details of the beneficiary such as their name, contact information, address, etc. If you fail to do that then there will be a problem during the term insurance claim process and it may also lead to the claim rejection.

Moreover, select your beneficiary wisely. For instance, a married individual can nominate his/her spouse/husband or children. And if you are a single individual then you can nominate your parents or any other family member. If, in case, the beneficiary is minor then you also need to be listed guardian.

4. Disclosing Inaccurate Information about Medical History

Your health condition influences your term insurance premium. That is why, it is of utmost importance to your life insurance company. Therefore, revealing your previous as well as existing medical conditions, surgeries, operations, etc is mandatory. In addition to this, you should also mention if, in case, you have any sort of unhealthy habits such as consumption of alcohol, smoking, and other harmful drugs.

Besides, the health conditions of your loved ones mainly health conditions such as blood pressure, cancer, cardiovascular disease must be shared with the insurer in order to avoid the term insurance claim rejection.

5. Policy Lapses Because of Non-Payment of Insurance Premiums

Keep in mind that term insurance claims are settled for active term plans only. If, in case, you failed to pay the premium, your insurance policy lapses after the grace period (i.e. up to 30 days in annual premium term insurance policies).

In such circumstances, all premiums that have been previously paid account for nothing. That is why it is important to pay your premium on time so that your nominee can make the most of it when you are not around. However, if you forget to pay your premium and find it difficult to remember the date, then you can also set auto-debit facilities in order to ensure that your term insurance policy doesn’t lapse.

6. Ignoring the Policy Document

We can’t deny the fact that the majority of the people have a habit of glancing through any important paperwork and they usually ignore reading it fully. When it comes to insurance policy documents, make sure you read the terms and conditions of your term plan carefully. Reason being, policy documents include all the essential information such as medical conditions covered by your insurance company. So, if, in case, you claim for any disease that is not covered under your insurance policy without going through your policy documents, your term insurance claim will get rejected for sure.

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In a Nutshell

Usually, we decide the authenticity of any life insurance company on the basis of its claim settlement ratio. But keep in mind that a company that has a high claim rejection ratio might not necessarily be a bad or fraud company. Your insurance companies do not offer insurance to reject your claims. Sometimes people may also be the reason behind their term insurance claim rejection. So, it is imperative to go through your policy documents carefully. Also, keep the aforementioned points in your mind while buying a term insurance plan to enable your loved ones to have a hassle-free and smooth claim settlement process in times of emergency. Also, remember one thing, life insurance companies settle all legitimate claims.