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5 most common reasons that can lead to Life Insurance Claim Rejection

Life insurances are bought by people in order to protect their loved ones in the event of death. Life insurance providers help to protect the family of the insured in case of his/her untimely death by giving the family financial assistance. But what if the insurer rejects your claim? The family of the insured than would have to deal with both loss of their loved one also as to how to overcome financially. When the life insurance claim gets rejected it defeats the whole purpose of buying the life insurance in first place. Here are some of the common reasons as to why your claim could get rejected and also some risks that you should look out for:

  1. Non-disclosure or Misrepresentation of facts

An insurance is a contact based on utmost good faith i.e. it is the duty of both the insurer and the insured to disclose all the material facts related to the policy. Any non-disclosure of any material facts or incorrect data provided by the individual at the time of purchasing the policy may lead to rejection of claims. If death takes place due to a pre-existing medical condition that was not reported at the time of purchase of the policy, the insurer will have all rights to reject the claim. So it’s better to tell all the material information about you, otherwise, if the claim gets rejected then your family would have to deal with financial insecurity in case of your untimely death.

  1. Policy lapse/non-payment of premiums

Usually, a life insurance policy is only active for as long as premiums are paid. When no premium is made when it is due, a policy may lapse/terminate. When the policy lapses due to non-payment of premiums then the insurer will not be obligated to accept the claim, they will get a chance to straightaway reject the claim. So it is better to be regular with the payment of premiums. And if in case you forgot to pay the premium on time due to any reason then you should pay it within the grace period provided by the insurer in order to avoid policy lapse.

  1. Exclusions and Omissions

Every insurer states some exclusions that are not covered by a life insurance policy. It is better to read the policy document thoroughly and to know what is included and what is excluded in the policy. Listed below are some incidents which, if resulting in the death of a policyholder, put payment to the beneficiary into doubt:

  • Drug overdose
  • Addiction or misuse of non-prescription drugs
  • Death in an accident where the policyholder is found to be intoxicated
  • Suicide
  1. Failure to appoint or update nominee details

A nominee stated in the policy document is the person who will receive any and all benefits that come out of your insurance policy when the time comes. In some cases, people fail to update the nominee information and then this failure becomes the reason for the rejection of their claims. For instance, a person takes a life insurance policy and appoints his mother or father as the nominee. But when he gets married or his parents die then he should have updated the nominee details and should have appointed his wife and children as the nominees but he forgot to do so. And now if any claim arises then there are chances that the claim gets rejected as the appointed nominees (parents according to the case) may not be available anymore and the company would not be able to know as to whom the funds are to be disbursed.

  1. Avoiding medical tests

Insurers generally take medical tests of an individual before insuring his/her life. Avoiding these medical tests is not a good option because it lets you know of any pre-existing diseases and reduces the chances of rejection of claims. If the insurer is aware of your disease then it will be better as the insurer will now be able to cover it by offering you higher sum assured covering high risk. So it is always wise to undergo the medical tests instead of avoiding it.

Pragati Rajoria

Pragati Rajoria

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About Me

I’m a Commerce Graduate & CFP Professional, engaged in blogging since 3 years. I’m not affiliated with any financial product. The purpose of writing blog is to spread financial awareness and help people in achieving excellence for money. Please note that the views expressed on this Blog/Comments are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion.

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