Term insurance is a type of life insurance that provides a lump sum amount to your nominee in case of your untimely demise. It is one of the most important financial products that can secure your family’s future and help them cope with the loss of your income. However, not every term insurance claim is approved by the insurer. There are some common reasons why your term insurance claim could be rejected and how you can avoid them. This article will discuss these reasons and provide you with some tips to ensure a hassle-free claim settlement.
Four Common Reasons for Term Insurance Claim Rejection
Now that from the introduction, you have an idea of what is term insurance, let’s discuss the common reasons for rejection.
- False or incomplete information in the application form: When you buy a term insurance policy, you are required to fill out a form that asks you various details about your age, income, lifestyle habits, medical history, etc. The insurer uses these details to assess your risk profile and determine the premium and coverage of your policy.
If you provide incorrect or misleading information, such as understating your age, overstating your income, hiding your smoking habit, etc., you are violating the terms and conditions of the policy. This can lead to claim rejection, as the insurer can prove that you have misrepresented or concealed material facts that affect the risk assessment.
- Non-disclosure of medical history or existing insurance policies: When you buy a term insurance policy, you are required to disclose your medical history, such as any pre-existing diseases, surgeries, and family illnesses. The insurer uses these details to evaluate your health condition and decide the premium and coverage of your policy. If you hide or ignore any medical condition, such as diabetes, hypertension, cancer, etc., you are violating the terms and conditions of the policy. Failure to disclose important information can result in the insurance company rejecting your claim.
Similarly, when you buy a term insurance policy, you are required to disclose your existing insurance policies, such as life, health, and accident. The insurer uses these details to check your insurability and avoid over-insurance.
- Delay or lapse in premium payment: In a term insurance policy, you agree to pay a fixed amount of premium at regular intervals, such as monthly, quarterly, or annually. These premium payments are essential to keep your policy active and valid. If you miss or delay the premium payment, you are violating the terms and conditions of the policy. This can lead to policy lapse and claim rejection, as the insurer can prove that you have not fulfilled your contractual obligation.
To avoid this, you should always pay your premium on time and in full. Opt for a convenient mode of payment, such as online, auto-debit, or ECS, that ensures timely and hassle-free payment. If you have any financial difficulties or emergencies, contact the insurer and request a grace period or a premium holiday. If you have any doubts or queries, clarify them with the insurer or the agent before signing the policy.
- Not updating the nominee details or filing the claim properly: The term plan insurer requires you to nominate a person or persons who will receive the death benefit in case of your demise. These nominee details are crucial for the claim settlement process, as they determine who the rightful claimant of the policy is. If you do not update the nominee details, such as in case of marriage, divorce, or death of the nominee, your legal heir may face difficulty in receiving the claim amount.
Conclusion
In conclusion, securing your family’s financial future with term insurance is crucial, but ensuring your claims are not rejected is equally important. Avoid pitfalls like providing false information, concealing medical history or existing policies, and missing premium payments. Keep nominee details updated and file claims accurately. By understanding these reasons for claim rejection and taking proactive steps, you can safeguard your loved ones’ financial stability during challenging times.
