Life Insurance Claim Rejection - Why does it happen?

A life insurance claim getting rejected is usually a nasty surprise and can put the claimants in a difficult spot. Although times when it is the company's fault are not completely absent, there are even more times when it is actually the fault of the policyholder or the nominee. Therefore, you must be aware of the reasons why your claim may get rejected to avoid such a situation.

Every insurance plan has its own terms and conditions. It is unfortunately only times when we get into a difficult situation that we become the most aware of them. However, that is definitely not the right thing to do. Carefully go over all the details of the plan before making a claim. Most plans have some standard situations which are not covered under them such as death by suicide.

In such a case, the nominee has to face a claim rejection. This is why it is important to make the most of the Free Look period. No matter how unlikely the situation seems to be, you must be aware of the minutest details provided in the plan.

Common Life Insurance Claim Rejection Reasons

Following are some of the common reasons for rejection of life insurance claims - 

• Wrong Information on Life Insurance Application

Any lies on a life insurance application can not only make things difficult for the policyholder but also for their claimants. Usually, insurance companies re-evaluate all the information during claims. Honest mistakes can always be explained but if it is an intentional lie, the claim may get rejected. It may also be that your agent or company put down the wrong details by mistake which is why it is important to go over all your documents carefully to avoid claim rejection later on.

• Lack of a Proper Nominee

Not only is it necessary to put down proper nominees but also update it in case of any changes. For example, if your spouse or parents were your nominees and they pass away before you, you must update the nominee details accordingly. Keeping outdated information leads to a lot of conflict and hassle for the claimants and even, claim rejection. Ultimately, all your hard-earned money may go to waste.

• Non-payment of Premiums on Time

Your life insurance plan is a deal with the insurance company that will help your loved ones get financial stability later on. However, you must uphold your end of the deal and pay your premiums regularly. A lapse in payment can lead to claim rejection and hassle for the ones left back to claim the amount. Insurance companies usually send reminders and even allow a grace period so make sure you have your correct phone number, email address or home address updated.

Endnotes

Most of the time we tend to buy a plan and keep the papers locked away till they are taken out by the claimants after our death. This is irresponsible as well as inconvenient. We must always make sure our policy papers are correct and updated.

Be diligent and responsible with your insurance plan. Do not just get it for the sake of it only to avoid it. Misfortunes are always sudden. To help your loved ones actually get the benefits of your life insurance and not face a claim rejection, make sure to be alert and not commit any of the above mistakes. 

Also Read

What Happens If You Lie On A Life Insurance?

Documents Required for Life Insurance Claim

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.