How to avoid rejection of an insurance claim

If the insurance firm senses that information about even lifestyle habits have been concealed, it could well turn down the claim

In a world of uncertainties, term insurance provides a safety net for grieving families in the unfortunate event of its breadwinner’s demise. But have you ever wondered what happens if your term insurance claim is rejected due to some reason?

The very thought of a rejected term insurance can make one shudder. This is because, after the death of the policyholder, their family is left in a state of shock if the funds it assumed would flow in, do not.

The loss of their breadwinner makes a deep cut into their financial standings. An event like this leaves the family clueless and in desperate need of stability and financial security.

To avoid adding to the misery in an already adverse time, it is essential to know what could cause a claim to be rejected.

Lack of transparency

While filling out your information for a term insurance policy, it is extremely important to reveal all the necessary information to the insurers in an honest manner.

This is key as the term-insurance policy is the means to safeguard the future of your family, and helps your insurer protect you better.

By hiding significant facts from the insurance company, people only give greater cause for rejection.

However, this situation can be avoided by ensuring that you provide accurate and true information regarding factors such as age, occupation, income, and existing policy details.

Providing details about pre-existing conditions is essential while opting for a new policy as these details surface sooner or later anyway.

Undisclosed choices

Hence, it’s best to come clean about such conditions at the time you sign up for the policy. This not only strengthens your case but also helps your insurer process your request without disruptions.

The lifestyle choices of an insured person directly impact how much premium they would pay for their term life insurance.

These include unhealthy eating or other lifestyle choices such as smoking, drinking, and the like.

World Health Organization data shows India is home to 12% of smokers worldwide, with more than 1 million lives claimed annually due to tobacco-related illnesses. Insurers offering term life insurance approve the policy and decide premium amount based on various lifestyle and health factors. Information regarding such habits must be disclosed to the insurer while applying for term insurance.

Also, people with a penchant for dangerous hobbies such as paragliding and deep-sea diving need to mention this to their insurers while applying for a term plan.

Doing this will help the insurance company assess your case better and gauge the best premium amount for you.

Delegating paperwork

There are two parts to getting a term plan. The first involves research to find a suitable plan. The second part requires careful perusal of documents and understanding the terms and conditions of the policy.

Usually, by the time people finalise a policy after thorough research, they are too drained to go through any more details. So they entrust paperwork to agents.

But, it is not advisable to hand over the responsibility of filling and submitting the insurance forms to a third person.

Since the financial future of our loved ones depends directly upon it, it is our responsibility to be careful in these matters. Missing out any significant details in these forms and documents such as the family’s medical history can cause problems later on.

Pre-existing policies

It is a common mistake for people to overlook the policy declaration rule which dictates they must disclose their existing policies to the new insurer.

A lot of buyers are not aware of this. Regardless of how small or large your sum insured is, be sure to inform your insurer about it. Failing to do so will certainly lead to rejection of your claim.

During the claims process, the column containing your medical history is taken into account.

It is of tremendous significance as it is directly correlated to your overall health graph and makes a huge impact on your claim’s acceptance or rejection. As a significant part of the proposal form, this section encapsulates the medical conditions of the proposer and their family.

This is what helps the insurer decide the amount of premium to be charged and whether or not the policy may be issued at all.

Nature of profession

While people from all walks of life can opt for a term insurance policy, some professions carry high risk that border on ‘life-threatening’.

People with jobs that require working in a mine and firefighters are part of this category. It is best to mention the nature of such jobs to your insurer to avoid problems going forward.

At the time of claim, if an insurer feels such information was hidden from them at the time of signing up, the claim could be rejected.

A policy lapses when it lost its validity on paper – either because the term period has ended or because premiums had not been paid within deadlines.

Filing a claim for a lapsed policy is a meaningless exercise that will fetch you nothing. In other words, any claim you raise with a lapsed policy will get rejected.

‘Due date is key’

Paying periodic premiums either on or before the due date is necessary to maintain the validity of your term plan.

However, insurance firms offer a few days’ grace period in case a policyholder fails to pay the premium on time.

But it must be remembered that no claim will be paid if the policy is not renewed within the grace period. Hence, it’s essential to take utmost care against the lapse of policy for protection against any untoward event.

(The writer is Head, Term Life Insurance, Policybazaar.com)

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