More than 1.8 million death claims were settled in the financial year 2019-20. On the other hand, less than 14,000 claims were rejected. Life coverage has only a few exclusions that might result in your claim being denied. While it was a normal thing for insurance providers to exclude death due to certain reasons around 15 years earlier, life coverage has evolved a lot since then. The only distinction now that matters is the one between life insurance and personal accident insurance. While the latter only covers accidental death, the former covers death by any cause. Hence, rejection ends up being a rare phenomenon.
Why Rejection Is Rare?
A Term insurance policy does not have a lot of terms and conditions that you need to abide to in order to get the benefit you pay for. It is simple, if you die, your family gets the sum assured. Hence, at the time of claim, all that the insurance provider needs to confirm is that the policyholder has died. This can be easily done through a death certificate.
Why Your Claim Could be Rejected?
One of the major reasons that your term insurance claim may be denied is due to the non-disclosure of vital information. This means that if you have hidden any information from the insurance provider at the time of buying the policy, your claim will be considered invalid once the insurer finds out. In most cases, the withheld information is about the policyholder’s health issues, any other policy they may have purchased, and any other problems that may change the deal of life insurance term plan at the time of purchase. All of this information is necessary at the time of purchasing the policy, especially in the underwriting part of the process.
Withheld information like poor health is a sign of lower longevity of a person. In such a situation, a good term insurance deal bought through non-disclosure of information can be classified as fraud. This is the reason that once you provide your information to the insurance provider, they will verify it and check for any other information that could be connected to you. As a result, the Supreme Court has explicitly declared non-disclosure of information as valid grounds for declining claims.
That being said, claim rejections due to non-disclosure of information are becoming a rare occurrence lately. This is due to a new provision in law that does not allow claims to be rejected after three years of buying the policy. The idea is that only people that are likely to die in the next three years would not disclose vital information in order for their family to receive a payout. Hence, any claim made within the three years of buying the policy will be investigated.
Use a term insurance plan calculator, know your premium amount, and get started on protecting the life goals of your loved ones today. Visit your favorite life insurer’s website to know more.
