Why do insurance claims get rejected? Here are the 5 common reasons

Many insurance claims are rejected by companies due to different reasons. If you want to get a full claim, here are the common reasons that you can avoid

If you don't want your family to struggle financially in your absence, a term insurance plan could be an ideal deal for you. 

If the policyholder dies, the insurance company provides a lump sum payment to the family of the deceased.

This payout can be used to cover day-to-day expenses for the purpose they see fit after losing a family member. However, there are certain circumstances when your term insurance provider may reject the insurance claim filed by the nominee of the deceased.

What is Term Life Insurance?

Term life insurance provides death benefit-paying beneficiaries of the policyholder throughout a specified period of time. 

It is a written demand from the nominee requesting to disburse the death benefit payout under the plan. Only after successful verification of the policy details, the nominee, and the circumstances of the demise of the policyholders will the insurance company pay the benefit to the nominee.

There are certain situations when the policy company can reject the insurance claim. Let's understand them in detail.

Top reasons for term life insurance claim rejection

Here are the five reasons for term life insurance claim rejections:

Incorrect information

One of the most common reasons for the rejection of an insurance claim is filing wrong or incorrect information. All the sections in the insurance claim form should be filled in correctly such as income, age, qualification, occupation, lifestyle (smoking/drinking), previous policy details, etc. All the information in the application form should be correctly and carefully submitted.

These are the important factors deciding the amount of premium. Incorrect or incomplete data can also constitute fraud and lead to the suspension of the policy benefit.

Non-Disclosure of Medical History

A person needs to disclose all his existing medical conditions, surgeries or other operations, influencing policy premiums. Most of the insurance terms need to highlight the lifestyle choices of the policy taker, like smoking while computing the premium.

Health details of the family member, especially conditions like cardiovascular diseases, blood pressure, cancers or any other hereditary conditions should also be shared correctly to avoid claims rejections.

Non-Updation of the Beneficiary

Many times, policyholders fail to assign nominees to their term plan. The failure to update the name of the nominee can lead to the rejection of a term insurance claim. This will also help you better understand life insurance policy. Hence, carefully fill out the form for a term life insurance plan for yourself.

Failure to Disclose Existing Plans

While purchasing any term plan, you need to disclose other term policy plans under your name. Insurance companies consider these other plans during their financial underwriting process. 

In case you missed disclosing an existing policy, their insurer can either cancel your existing plan or may reject further claim requests.

Lapse in Policy

To claim your insurance policies, you should have an active insurance policy. Your current policy will become inactive if you fail to pay the premium.

This is a very common reason for the rejection of insurance policy claims. To help you with this, most of the insurers need to come with a grace period which will enable you to pay your premium even after missing your payment due date.