Life insurance companies emphasize a lot on their effective and transparent claim settlement process to lure the prospective customers. A closer look at the advertisements of insurance providers reveals much the same. Every company portrays its claim settlement process as fast, easy and convenient. However, reality may be slightly different.
No matter how efficient/clear the systems are, the rejected claims cases are bound to happen. Sometimes it can be an error by the insurance company but most of the time it is because of negligence/ignorance from the policy holder. Claim filing does not guarantee that the amount will be disbursed. The insurance company can reject it stating the reason for its rejection.
Before filing claim papers, you need to be aware about the reasons for claim rejection. The most common reasons why claims get rejected are:
Non-Disclosure or Wrong Disclosure of Facts
Wrong or no information is the most common factor for rejection of claims. The logic behind this is quite simple, the premium and risk coverage is determined by the personal details like age, profession, health condition, medical history etc. If the company checks the details and believes there is any misrepresentation, the claim could be denied. Therefore, as a responsible buyer it makes sense to provide right information such as any pre-existing medical condition in the insurance form to avoid any claim rejection in case of death due to that disease only. Sometimes there can be a possibility that the insurance company has by mistake put a wrong detail, so it is wise to check the policy documents as soon as you receive them and inform the insurance company in case of any mismatch.
Lapse in Policy
If the premiums are not paid as per the due dates the policy will lapse. The insurance companies also provide grace period to the policy holders in case they are unable to premium in the specified time frame due to any reason. The policy will stand lapse in case the holder fails to pay even after the grace period. As a rule, the policy claim is admissible only if the policy is in force and not lapsed due to late or non-payment of premium. Even though companies inform the policy holders to pay the premium on a regular basis via messages and mails, it is good that you put your own reminders for premium payment and continuation of policy.
Not Appointing or Updating Nominee Details
The insurance products in India are looked as obligatory products rather than necessary ones. Therefore, we just buy them to fulfil the stipulated obligation such as Tax saving or penalty due to non-purchase of insurance. The policy holder thus does not completely understand the claim process, and fail to appoint or update nominee. For example, most of us get our first policy within couple of years of our first job. The nominee in these policies are generally father or mother of the policy holder. These details do not get updated in case of death of parents or after marriage of the policy holder. In case a claim arises, there is a very high probability of rejection as the appointed nominees may not be available anymore, and the company cannot figure out whom to disburse funds. Therefore, it is prudent that the policyholder should update the nominee details as soon as any material change takes place in the previous nominee status.
Avoiding Medical Tests
The insurance provider verifies every medical detail filled by the applicant, especially in case of high age or high risk coverage. Most of the companies conduct medical tests for the same. If you avoid these tests, then rejection of claim by the insurer stating some pre-existing disease as a reason is high. It is always wise to go for the medical tests so that you can spot any pre-existing illnesses and the company can provide coverage for these conditions. This will also reduce the chance of rejection during claim as the medical tests have already been performed.
Exclusions and Omissions
Every insurance provider states certain conditions under which the claim can be rejected. Some of them are suicide, drug overdose, death by accident under intoxication. Death due to any of these reasons are bound to be rejected as they do not come under a valid claim category as per the insurance companies.