7 Reasons Why A Life Insurance Claim May Be Rejected

Your family means the most to you, so you want to invest in a life insurance plan to provide for them - even in your absence. You look at the various types, their respective benefits, and features, and choose the one that’s tailored to your family’s needs. You also customise it by adding riders, and selecting the payout option that would be convenient for your nominee. But what happens if you actually pass away during the policy term?
Given the nature of life insurance, your family will receive the claim amount (the Death Benefit) when you're not around anymore. So it’s all the more important to learn about any complications that may happen at the time of claim - and how your family can avoid them.

In this article, let’s take a look at some of the factors that may affect a life insurance death claim. So if the time comes, it will not be overwhelming, but a smooth, fast, and easy experience for your family.

7 Life Insurance Claim Rejection Reasons

Here are the 7 reasons why a life insurance claim may get rejected:

• Incorrect Or Incomplete Declarations In The Proposal Form
  When you purchase a life insurance policy, you will need to fill out a proposal form with all your details, like name, age, address, qualifications, occupation, etc. You will also need to submit documents like your ID proof like an Aadhaar Card, proof of income like income tax returns, and recent passport-sized photographs.
  

As per Section 45 of the Insurance Act, 1938, the insurer cannot reject your claim if your policy has been in force for 3 years continuously. However, in cases of early death within the first 3 years of the policy, the insurers have been known to investigate the reason for death. And if they find any wrong declarations made in the proposal form, they may dispute the claim.
So it’s really important to be honest with your insurer and disclose all the necessary details. This will save your family the trouble of facing issues regarding claims when they’re already going through so much.

• Documentation Issues At The Time Of Claim Submission
  To receive the life insurance death claim amount, your nominee will need to submit the claim form and other relevant documents. Along with the mandatory documents, the insurer can even ask your nominee to share additional documents - depending on the product.
  

The insurance company will verify the submitted documents, and only then initiate the claim intimation request. If the documents are incorrect, or the insurer finds any discrepancy with them, your family's claim may get rejected.
The claims process and document requirements are subject to change and may vary from insurer to insurer. Therefore, at the time of policy purchase, make sure you ask the right questions to the insurer and understand the policy thoroughly. Once you and your nominee learn about the details, you can bring all the policy-related and other documents together, and store them in a safe, secure place to avoid misplacement and confusion.
You can also create an account on the Digilocker app or open an e-insurance account to store the documents in digital format. Remember to share the account details with your family members - so they can take over the process when you’re not there.

• Exclusions In Your Policy
  Along with the features and benefits of a policy, it is also important to know about its exclusions (situations it won't cover) - to avoid any surprises during the claim. There's just one exclusion in life insurance - death due to suicide in the first year of buying the policy. So if a claim is filed on the grounds that a suicide has taken place within 1 year, it will be rejected. In this situation, however, all the premiums (excluding the taxes) you have paid in the first year - will be paid back to your nominee.
  

If you opt for riders, i.e., optional benefits with your life insurance policy, you should know that they come with specific exclusions too. So, while only death due to suicide in the first year will be excluded under your base life insurance plan, there might be a variety of deaths that the riders won’t cover. It is important to inform your family about this - to avoid any hassles at the time of claim.

• Timely Renewal Of The Policy
  Along with the features and benefits of a policy, it is also important to know about its exclusions (situations it won't cover) - to avoid any surprises during the claim. There's just one exclusion in life insurance - death due to suicide in the first year of buying the policy. So if a claim is filed on the grounds that a suicide has taken place within 1 year, it will be rejected. In this situation, however, all the premiums (excluding the taxes) you have paid in the first year - will be paid back to your nominee.
  

If you opt for riders, i.e., optional benefits with your life insurance policy, you should know that they come with specific exclusions too. So, while only death due to suicide in the first year will be excluded under your base life insurance plan, there might be a variety of deaths that the riders won’t cover. It is important to inform your family about this - to avoid any hassles at the time of claim.

• Not Disclosing Your Existing Policies
  When you're applying for life insurance, it's crucial to disclose any existing policies you have. By not doing so, you run the risk of having your claim rejected. Insurers rely on having a full understanding of your coverage to accurately assess the level of risk involved. Failing to disclose this information could be seen as a breach of the duty of utmost good faith, which could potentially put your claim in jeopardy.

• Suppressing Your Medical Details
  When it comes to your medical history and underlying health conditions, it's important to be transparent. Concealing or inaccurately providing information can often result in claim rejection. If the insurer later discovers that important medical details were withheld during the application process, it could lead to disputes and rejection, especially if the non-disclosure is related to the cause of death.

• Delay In Claim Intimation
  When the life assured unfortunately passes away, it is crucial to notify the same to the insurance company. Delaying the notification of death may lead to complications when making a claim. It is essential for the nominee or beneficiary to initiate the claims process promptly to avoid potential obstacles and ensure a seamless settlement.

Things To Keep In Mind To Avoid Life Insurance Claim Rejection

Here are some important things to keep in mind to minimise the risk of life insurance claim rejection -

• Complete And Accurate Application:
  You should provide honest and accurate information when filling out the application form. Any misrepresentation or omission may lead to claim denial.

• Disclosure Of Medical History:
  Disclose your complete medical history, including pre-existing conditions, medications, family’s medical history, etc. Failure to disclose these details may result in claim rejection.

• Understand The Policy T&Cs:
  You should ensure that you thoroughly understand the policy terms and conditions. Be aware of any exclusions, limitations, or other aspects that may affect the claim payout.

• Pay Premiums On Time:
  Make sure that you pay your policy premiums on time. A lapsed policy due to non-payment can result in the termination of coverage, and claims will not be honoured if the policy is not in force.

• Maintain Records And Documentation:
  You should keep detailed records of all communications with the insurer, including policy documents, premium payment receipts, and any correspondence. This can be valuable in case of any disputes in the future.

Wrapping Up!

So, these were some of the factors that can affect a life insurance death claim. Besides keeping the above things in mind, you must also inform your family about the policy you have taken. Take them through the claims process, the list of documents they may have to submit in case a claim under the policy arises, etc. As important as it is to leave good coverage for your family, it is equally important to make sure, if the time comes, they have a smooth claims experience. So there is no additional burden when they are already going through a difficult time.