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Term Insurance Claim Rejection Reasons

Term insurance is an important financial tool in India that provides a safety net for family members in the event of your sudden demise. During the policy tenure, the insurance company pays your family a certain sum of money. However, to avail a smooth insurance claim process1, provide relevant information to your insurer. Providing or hiding false information to the insurer might lead your claim to get rejected. ...Read More

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Term Insurance Claim Rejection Reasons

Tops reasons for Term Insurance Claim Rejection

Features of Term Life Insurance
October 14, 2024

Table of Content

 

What Is Term Life Insurance?

Term insurance is the simplest form of life insurance that exists as an agreement between the insurance company and the policyholder for a specific period, the 'term'. The term usually ranges between 10 to 40 years. During the policy tenure, if there is a sudden demise of the policyholder, the insurance company provides death benefits to the beneficiaries involved in the policy.

Term life insurance is less expensive in comparison with other policies. Because it provides only life coverage for a defined period, it carries lower premiums compared to whole-life insurance, endowment policies and ULIPs. Thus, individuals consider it an appealing option, especially if they have financial obligations to meet their child's educational expenses or mortgage.

Can a Term Insurance Claim Be Rejected?

Yes, your term insurance claim can get rejected. You might not receive funds later on from your loved one's insurance coverage. This mostly happens when complete details are not provided to the insurance provider or if the insured individual fails to make the insurance payment and then it gets lapsed. Another common reason for claim rejection is submitting a claim for an event listed within the 'Exclusions' header of the policy.

Here are some common instances excluded from term life insurance coverage:

  • The death of a policyholder due to preexisting health conditions that were undisclosed.
  • Policyholder’s death where a nominee plays a vital role.
  • Policyholder's death due to certain adventurous activities that include paragliding, riding, racing, and others.
  • The policyholder’s death due to consumption of excessive drugs or alcohol.
  • The sudden demise of a policyholder during childbirth when pregnancy news was not disclosed.

Term Insurance Rejection Reasons

Term insurance rejection can take place due to several reasons, mostly due to providing incomplete or inaccurate information. There are factors for assessing risk and discrepancies that lead to such rejections. Proper understanding of these reasons can help a policyholder experience a smoother application process.

Let’s explore the main reasons for different types of life insurance rejection in detail:

  • Not Disclosing Medical History or Existing Conditions

Not disclosing medical history and pre-existing conditions falls under misinformation given to one’s life insurance provider. While applying for term insurance, policyholders must provide important details relating to the policy for quick and easy approval. Details include present medical conditions, staying in the hospital before admission, and other risky activities.

Failure to disclose such facts might result in claim rejection due to misinterpretation. Make sure to be transparent and disclose all relevant information to avoid claim denials during a period of distress for your loved ones.

  • Missing Beneficiary or Nominee Information

A nominee or beneficiary is an individual who receives the death benefits of an insured individual. Thus, make sure to keep your insurance updated on the nominee's details, address, contact information, and other information. Failing to do so might interrupt the claim process and lead to rejection of your life insurance claim.

Thus, choose your nominee wisely. If you are married, you can nominate your spouse or children, whereas if you are single, nominating your parents or other close family members is advisable. In case the nominee is a minor, mentioning a guardian's name is a must.

  • Not Sharing Details About Current or Past Plans

Failing to disclose details about current or past plans may lead to rejection of your term insurance application. Providing correct and accurate information is the key to assessing risks accurately. Hiding these details while filling up a form can lead to policy rejection, thereby affecting the risk profile of policyholders overall.

  • Providing Incorrect Information On Your Form

Providing incorrect information while filling out a form can create issues in claiming life insurance. All detailed information regarding age, occupation, income, qualification, lifestyle, and information on previous policies should be filled out in the application form correctly. All these factors play an important role in determining the premium amount. Providing incorrect data might lead to fraud and prevent a beneficiary from availing policy benefits.

  • Policy Expired Due to Missed Premium Payments

A policyholder can file claims only for active insurance policies. However, missing the premium payment will cause a policy to lapse after the grace period (which is the 30-day maximum applicable for annual premium policies).

In this scenario, paid premiums before are not taken into consideration. To prevent this from happening, opt for direct debit facilities. Still, if you miss paying premiums on time, pay the prescribed fees to revive the policy.

Summary

Term insurance provides essential financial protection to your loved ones, even in your absence. Proper understanding of the term insurance claim rejection reasons and taking proactive steps will make sure your family members receive the right payout.

Be honest and communicate properly to experience a smooth claim settlement process and receive financial support during difficult times. To minimise the chances of claim rejection, make sure to choose the right insurer and disclose all relevant information. You can also reach out to the insurance company’s customer support or insurance agent for assistance.

FAQs on Term Insurance Claim Rejection Reasons

1. Why is my term insurance rejected?

Your term insurance claim might get rejected due to false information, policy lapse, undisclosed medical history, inaccurate information about policies, nonpayment of premiums, and more. Insurers rely on the details you provide to measure risk and assess coverage accurately.

2. What is a common rejection for insurance?

The most common reason for rejection of insurance is providing incorrect information relating to age, income, occupation, etc. Ensure to avoid giving any false or misleading details, as they play a crucial role in determining the premium and coverage of the policy.

3. What to do if an insurance application is rejected?

Follow the below steps if your insurance application gets rejected:

a) Understand the reason behind the rejection of your application form.

b) Take steps to improve your health stats.

c) Consult a physician for a detailed medical report.

d) Apply again after the waiting period as per your insurer’s suggestion

4. Who cannot buy term insurance?

Individuals below 18 years of age are not eligible for purchasing term insurance. Though an age requirement is applicable for the majority of insurance companies, the limits may vary.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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1. Claims are processed in accordance with section 45 of the insurance act 1938

##Individual death claim settlement ratio by number of policies as per audited annual statistics for FY 2023-24.

#Provided we have received all the relevant and required documents and no further investigation is required. Claim settlement process would be completed within stipulated timelines once the claim request is approved

***Online Premium for Life Option, Male Life Assured, Non-Smoker, 20 years of age, Policy term of 25 years, Regular pay, Annual frequency, exclusive of taxes and levies as applicable. (Monthly Premium of 622/30=20.7).

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