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It is essential that the beneficiary or the nominee(s) of the policy know the details of the policy, have access to the policy document, and know how to initiate a claim and receive the benefit. These are some of the most crucial things that a policyholder needs to ensure to minimise the possibility of claim complications for their survivors.
However, even if a beneficiary or nominee knows the process of initiating a claim well, it is possible that their claim may be rejected. This could be for one of numerous reasons. Let’s look at some of the key reasons why nominees may have their life insurance claim rejected and some best practices to avoid it.
Life Insurance Claim Rejection Reasons
While some of the common reasons for life insurance claim rejection have to do with the claim process initiated by the nominee, some significant ones stem from the decisions of the policyholder.
While the rejection of a life insurance policy claim by the insurer is not entirely uncommon, it is possible to alleviate the chances of your claim being rejected by following the right steps. Knowing why claims are usually rejected may be helpful.
Here are six common life insurance claim rejection reasons you may come across.
1. Delays in filing claim
Dealing with the aftermath of the passing of a near-and-dear one, in addition to coping with your grief as well as supporting your loved ones can be quite draining in multiple ways. If you are a life insurance policy nominee, you have the additional responsibility of initiating a claim with the insurer soon after the passing of the life assured. Failure to intimate the insurance provider about the passing, or delaying claim initiation beyond the stipulated period, can lead to your life insurance claim being rejected.
2. Providing inaccurate or wrong information
This is one of the mistakes that is made by the policyholder, but their loved ones may end up paying the price. Whether it be a simple term insurance policy or a complex life plan like ULIP, it is essential to provide accurate information to your insurer. Failure to do so increases the risk of claim rejection. For example, ensure that your name as well as the name of your nominees is accurate. Furthermore, avoid falsifying information (such as age and income details).
3. Undisclosed medical history
It is another major reason for life insurance claim rejection. Not disclosing pre-existing health conditions at the time of purchase of an insurance plan may lead to a claim rejection in the future. In order to avoid this issue during the claim filing process, all medical disclosures should be made. Accurate reports concerning the most recent medical records and any previously existing medical conditions must be correctly and honestly disclosed in the application form.
4. Unentitled nominee
A nominee is a person entitled to the benefit in the event the insured person passes away. The processing of the claim may get delayed if the policyholder did not have a nomination on file. An insurance company requests documents to show the line of succession in the absence of a nomination. Claims will still be fulfilled provided the family members submit the required paperwork.
5. Non-disclosure of other policies
As per the guidelines, not disclosing information, or giving incorrect information about the policies that an applicant is currently holding or has previously held may lead to rejection of death claim. The insurance company may totally reject a claim if the policy was rejected by another insurer or issued with additional terms. Disclosing the previous or current policies is essential while buying a life insurance policy. Non-disclosure or hiding of material facts may lead to rejection of the contract and claims by the Insurance Company.
6. Inaccurate disclosure by NRIs
In case of NRI policyholders, the underwriter needs to know the name of the nation where the life insured is residing in order to make a decision about the life coverage. There are some nations where insurance coverage is not offered in accordance with our agreement with reinsurers. This could be denied at the claims stage if it is not reported at the onboarding stage.
How to Alleviate the Chances of Claim Insurance Rejection?
Here are a few best practices to help you reduce the of chances having your life insurance claim rejected.
- Provide accurate information to your insurer. If any of the details are updated, such as a name change, intimate your insurer as soon as possible.
- Ensure that the nominee details you have provided are accurate. For example, if the nominee changes their contact details, update them on your policy at the earliest.
- Ensure that your nominee knows all necessary details about the policy.
- Choose an insurer with a high claim settlement ratio.
Whether you are buying a term insurance plan, a whole life plan, or a ULIP, if you want any benefits to be passed onto the intended person, ensure that you abide by the right practices. You can also consult an insurance expert or your insurance provider to resolve any relevant doubts you may have about your policy to avoid further complications.
