How Can Claims For Term Insurance Get Rejected?
Updated On Aug 15, 2022
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Term insurance aims to protect the insured's family against an unfortunate event. It helps the family of the insured with financial safety and supports them in times of crisis. But there are instances when the claims for the term insurance get rejected. Claims rejection is the most disturbing event as financial stress adds to the emotional drain of the family.
Claims Rejection
The insurance claim will be lodged by the nominee of the term insurance policyholder, in the event of the policyholder's demise during the policy tenure. The insurance provider will verify the details of the policy and the circumstances of the death of the policyholder and pay the death benefit to the nominee. But at times, there are chances for the insurance company to reject the claims of the deceased's family members and cease to pay them the death benefit. This is referred to as claims rejection. Some good reasons why the insurance company rejects the claims of the nominees are as follows.
- Death of the policyholder due to health conditions that were not disclosed at the time of taking the policy.
- The nominee has a direct role in the death of the policyholder.
- Death due to excess alcohol and drugs.
- Death due to participating in adventurous sports such as paragliding, rafting, skydiving, etc.
- Death by suicide.
Top Reasons for Term Insurance Claims Getting Rejected
An insurance policy is an agreement between the insurance company and the policyholder, and this agreement is based on mutual trust. Under certain circumstances, there are chances for the term insurance claims to get rejected. The top reasons for the rejection of insurance claims are as follows.
a. False Information
The term insurance plan is offered based on the policyholder's age, lifestyle habits, medical history, income, and occupation. The insurance company will reject the claim and suspend the policy benefits if any information is falsely declared, undisclosed or incomplete.
b. Hidden Medical History
Not disclosing information relevant to surgeries, family illnesses, and other medical conditions can become a valid cause for rejecting the term insurance claim. Policyholders should provide all necessary information regarding their medical history to the insurers. They should check the information thoroughly to mitigate the risks of claims rejection.
c. Nominee Details
A nominee is a person entitled to get the policy's benefits after the policyholder's death. The insurance company will reject the claim if no nominee is updated and the legal heir cannot be decided. The insurance company will call for documentation to prove succession if the nominee details are not given. The policyholder should also update the nominee details upon the demise of the nominee (if an unmarried person has given the names of his parents as nominees).
d. Not Paying the Premiums Relevantly
One of the most common reasons for the undue lapse of the term policy is the non-payment of premiums. Claims will be paid only for the active insurance policies. The insurance company will reject claims for a lapsed policy.
Bottom Line
Withholding information about the current and previous insurance policies at the time of purchasing the term plan is also an important reason for rejecting insurance claims. Policyholders should ensure that the beneficiaries are aware of the entire term insurance claim process, including the documents required for a claim. Policyholders should always provide accurate and complete information and remember to play all the premium payments within the due date.
Also read: Different Type Of Bonuses Available Under A Life Insurance Policy
