Protecting your family against an unfortunate event is one of the reasons to choose term life insurance. It provides a financial safety net that prevents them from falling apart during times of crisis. However, wouldn’t it be bad if that safety net had holes that let them fall through? One of the most distressing events is getting your term insurance claim rejected. It is emotionally draining to experience an unfortunate event like this and financial stress.
It becomes even more problematic if the policyholder is the household breadwinner.
Sometimes, a claim is rejected even when the policy is carefully selected, and the insurer’s claim settlement ratio is checked. However, you can avoid the rejection of a term insurance claim by knowing some of its reasons and taking steps to avoid it. Following are the reasons why term insurance claim gets rejected:
An insurance policy is a trust-based agreement between the policyholder and the insurance company. Policyholders trust their insurance company to honour their claims in an emergency, whereas insurance companies trust all information provided about their policyholders. Thus, it is assumed that the information provided by the insured is accurate. Nevertheless, some people may attempt to withhold some of their personal information to reduce the cost of their insurance policy.
Term insurance policies are based on factors such as age, medical history, lifestyle habits, income, and occupation. Insurance companies may reject claims if any of the information is false, incomplete, or undisclosed. This situation can be avoided by ensuring that all data is accurate. It is also important to inform the insurer of any changes in the information given.
The Delay In The Payment Of Premiums
It is common for term policies to lapse due to non-payment of premiums. Only active insurance policies are eligible for claims payments. If your policy has lapsed, you are not eligible for any benefits.
It is possible for a policyholder to forget to pay the premium unintentionally. After this, the insurance company reminds you through emails, phone calls, and texts to make the payment. In some cases, a grace period of up to 30 days is offered. If the policyholder does not respond, the policy is considered lapsed. Your earlier premium payments go to waste as well, and you cannot claim any compensation.
Set up an auto-debit or ECS instruction with your bank to ensure your policy remains active. You can also create a payment calendar and follow it diligently.
An Undisclosed Medical History
Based on your medical history, the company determines the coverage and premium for your term insurance policy. If you ignore medical tests or withhold information about surgeries, illnesses in your family, or any other conditions, your term insurance claim could be rejected.
If you are planning to invest in term life insurance, you will have to undergo a medical examination. If sufficient tests are not conducted, the insurer may claim that a critical illness is pre existing and deny your claim.
It is crucial that you provide your insurer with all relevant information regarding your and your family’s medical records. Confirm that you have included all pre-existing conditions in your application to minimise the risk of claim rejection.
An Unqualified Nominee
The nominee is the person entitled to receive all policy benefits as instructed by the policyholder. There is a possibility that an insurance company will reject the claim if no nominee has been updated and a legal heir cannot be determined (though this is extremely unlikely).
In the absence of a nominee, an insurance company requires documentation to prove succession rights. This is a somewhat complicated procedure and leads to difficulties in clearing the claim. It is common for a person’s parents to be named as nominees on a term plan when bought at a young age. The nomination can be rejected if the decedent’s demise is not updated.
Thus, when buying a term insurance policy, a nomination is essential. Make sure the details are up-to-date, and always check them.
Existing Insurance Policies Not Disclosed
At the time of purchasing a term plan, it is crucial to disclose your current and previous insurance policies. If you withhold or hide such information, your insurance claim may be rejected. As part of a complete risk assessment, this information is required by policymakers.
If you declare all the plans you have before buying a term policy, you ensure that there will be no additional issues when it comes time to claim your benefits.
Ensure that the details provided to your insurance company are accurate, and keep a copy for future reference. In that way, your family will be safe and secure tomorrow if they need that safety net you created.
Buying a term life insurance plan is really important to help your family when things are tough. But to make sure this safety net really helps, you need to know and deal with why Insurance claims Administration might get denied. Among trustworthy insurance companies, Aditya Birla Sun Life Insurance is a good option. They are known for being open, helpful to customers, and fair when dealing with claims. This makes them a great partner as you plan your finances.
Vivek is a published author of Meidilight and a cofounder of Zestful Outreach Agency. He is passionate about helping webmaster to rank their keywords through good-quality website backlinks. In his spare time, he loves to swim and cycle. You can find him on Twitter and Linkedin.