Common Reasons Why Term Insurance Claims Get Rejected

Several reasons that may lead to the rejection of term insurance claims include the non-disclosure of medical history and the existence of prior or current policies. Other grounds for claim refusal include policy lapses, providing incorrect information and the neglect of nominee details updates.

While considering term life insurance, you will usually begin by choosing a coverage amount and the term period. Next, you will apply by filling out a form about your health and possibly undergoing a medical test.

The insurer will assess your application, and if approved, you will begin the payment of premiums to maintain your policy and coverage.

That being said, in certain circumstances, the insurance company may choose to reject the term insurance claim filed by the nominee of the deceased. This article will highlight the common term life insurance rejection reasons that you must know.

Term life insurance is a protection policy that provides a death benefit to the policyholder’s beneficiaries if the insured person passes away during the policy term. The premium is paid for a fixed duration, and the insurance company releases the sum assured to the nominee on the policyholder's death, depending on the terms and conditions of the policy.

For instance, you can opt for 1Cr Term Insurance, 2Cr Term Insurance, or 5Cr Term Insurance depending on the financial requirements, long-term objectives and liabilities of your family.

Term insurance is generally designed to provide a high life cover at a relatively affordable premium. The policyholder selects the coverage amount and policy term while purchasing the plan. Depending on the policy, additional benefits or riders may also be available for specific risks.

Similar to all insurance policies, a term plan is subject to specific terms and conditions, which essentially outline what is covered and what is not. One of the most common term plans claims rejection reasons is when the claim is submitted for an event explicitly listed within the 'Exclusions' section of the policy.

The policy does not cover any events mentioned in this section, resulting in the denial of the term insurance claim. Here are some instances that are explicitly excluded from term life insurance coverage:

• The policyholder's death by undisclosed pre-existing health conditions or injuries.
• The policyholder's death, where the nominee plays a direct or indirect role.
• The policyholder's death resulted from the influence of drugs or alcohol.
• The policyholder's death due to adventurous activities such as racing and paragliding, among others.
• The policyholder's demise due to complications during childbirth when the pregnancy has not been disclosed.

The following are the common reasons why term insurance claims get rejected:

Hiding medical history or pre-existing medical conditions

As a thumb rule, insurers estimate the premium amount based on your overall medical information.
For example, if you suffer from a heart attack during the policy term, and if the insurer discovers that you have not disclosed an existing heart condition, it may result in the rejection of a term life insurance claim.

Hence, it is necessary to give details about your previous medical conditions when you are buying term life insurance. You must also inform your insurer if you have undergone surgery or suffer from any current illness.

Absence of any beneficiary or nominee information

If you neglect to keep nominee details up to date, the need to submit a set of documents to prove the succession line may arise.

This procedure can be cumbersome and may create issues in the settlement of insurance claims. Failure to verify the legal heir by the insurance company could result in claim denial.

Failure to disclose existing or previous plans

When purchasing a term plan, you must inform your insurer if you have any other term policies under your name. Insurance companies consider these other plans during the financial underwriting process.

If you fail to disclose an existing policy, your insurer may either cancel your current plan or reject future claim requests.

Giving false information in your form

At times, people fill out information that is false or completely incorrect while buying a term insurance policy. Providing false data can lead to the cancellation of the policy at a later stage, eventually leading to the rejection of a claim.
Therefore, it is your duty to enter the correct details, such as your age, income, occupation details, etc., while purchasing a policy. Lack of honesty may account for fraud on your behalf.

Lapse in policy

To be eligible for claims, you must have an active insurance policy. Failure to pay your premium may render the policy inactive.
One of the most common term insurance rejection reasons is when there is an undue lapse of the policy because of non-payment of premiums. To help you with this, most insurers come with a grace period to enable you to pay your premium after missing its due payment date.
If you forget to pay during this period, you may have to pay the prescribed fees to revive your term life insurance plan.

Knowing the term insurance claim rejection reasons can help you take steps to reduce the possibility of claim-related issues. Here are some measures you can follow:

Provide accurate information

When buying a policy, be open and honest about your medical history, health issues, lifestyle, profession, and other factors. Inaccuracies or faults in the information are some of the most common reasons for term insurance claims being rejected.

Pay premiums on time

Maintain your policy by paying premiums on time and in accordance with the terms and conditions. Depending on the terms of the policy, a lapsed policy can impact coverage and can cause complications with claims.

Understand exclusions and conditions

Be sure to read the policy paper thoroughly to grasp exclusions, waiting periods, claim requirements and other conditions. Understanding the reasons for plan claim denials can help you recognise situations where a claim is denied.

Keep documents updated

Maintain your policy documents, premium receipts, medical records, and other relevant paperwork safely. Ensure that your nominee's details and contact information are updated whenever required.

Inform your nominee about the policy

Tell your nominee about the policy, insurer, policy number, and relevant documents. This can make it easier for the nominee to initiate the claim process and submit the required information.

Review your coverage periodically

Review your term insurance coverage when your financial responsibilities change, such as after taking a major loan, getting married, or having children. Understanding why term insurance claims get rejected and keeping your policy details updated can help ensure that the cover continues to meet your family's needs.

Some of the reasons for rejection of term Insurance claims include non-disclosure of medical history and previous or existing policies. Apart from the above two, other term life insurance rejection reasons include a policy lapse, submitting wrong information, and failing to update nominee details.

At Tata AIA Life Insurance, we follow an easy and rapid claim settlement process online to offer timely benefits. Our customisable term life insurance solutions allow you to modify the policy based on your needs. Once you have completed the claim registration process, you can also track your claim status online.