Life Insurance Claim Rejection is a common problem faced by people who buy life insurance. The policies that they buy do not cover death, disability, or critical illness. This is because their life insurance company has decided to reject their claim.
There are many reasons why a life insurance company might reject your claim. One of them is the lack of evidence of good health and fitness. Another one is the lack of evidence that the person was in a hazardous occupation or was exposed to hazardous substances or environments.
Life Insurance Companies usually have an internal process to evaluate claims before they are rejected by an underwriter, sometimes this process can take months before you are notified about the rejection, and sometimes you don't even know that your claim has been rejected until it's too late.
The article gives you a complete guide to dealing with life insurance claim rejection and what you do when your life insurance company rejects your claim. Who can you turn to for help and how should you react when your claim got rejected?
Table of Contents
What is Claim Rejection?
Claim rejection is a process where the insurance company will review the claim and decide whether or not to pay it. This can happen for many reasons, such as the claim being fraudulent or the policyholder not meeting their obligations. This is a very common problem, as many people are often unaware of their obligations and it is the insurer's responsibility to protect themselves from fraud and other crimes.
Why Life Insurance Claim Can Get Rejected?
Reasons for rejecting a life insurance claim could be many. The most common reasons are:
False Information
An insurance policy is an agreement between the insured person and the insurance company. The insurance industry works on trust and proper rules. False information can lead to a life insurance company denying coverage. There are various ways that false information can be introduced in an application for life insurance. The applicant may not have disclosed their medical history, smoking and drinking habits, etc. The applicant may have misrepresented their age, height, weight, and other relevant factors. Hiding information can lead to the rejection of a claim. So, It is very important, to be honest, and alert while filling out the application form to save your family from unnecessary hardships.
Delay in Premium Payments
Premium payment is a necessary cost for the insurance company. A life insurance policy is active only if premiums are paid on time. If you miss paying a premium the policy may lapse and an insurer can deny a claim of a lapsed policy. For example, if you have been making regular payments, but missed one payment and then made it up, this may be considered an irregularity and may lead to your claim being rejected. So if you are going to make a claim, you should always make sure that your premium is paid on time so that your claim will be approved.
Avoiding Medical Tests
Medical tests are an integral part while buying a life insurance policy. They are used to diagnose and verify the severity of a disease or injury. This process can take anywhere from a few days to a few weeks. The medical test results will determine whether or not you will be eligible for a life insurance policy. If you have had a medical test and it has shown that you are likely to develop a serious illness in the future, then your life insurance company may refuse to pay out on your policy when you die. So, medical health history takes place a chance of your claim getting rejected by the insurer.
Type of Death
Type of death can have a huge impact on the life insurance claim process. This is because death is a critical event in life that can lead to financial hardship for the family members. Not all types of deaths are covered by life insurance. According to statistics, people who died from suicide and pre-existing diseases and hazardous activities causes are more likely to be rejected for their life insurance claim.
| Type of Deaths Covered |
Types of Deaths not Covered |
- Death due to natural
- Death due to accidental
- Death due to murder
- Death due to illnesses
- Death due to Calamities
|
- Death due to suicide death
- Death due to Intoxication
- Death due to Self-injury
- Death due to HIV/AIDS
- Death due to a hazardous activity
- Death due to criminal activities
- Due to pre-existing diseases
|
Unentitled Nominee Details
The nominee is the person who is nominated to receive the proceeds of the policy. If there are no nominees, or if all the nominees die before the policyholder, then the insurance company will pay out to their legal heirs. But an insurance company may reject the claim if no nominee is updated and a legal heir cannot be decided to their satisfaction. So, the nominee has a significant role in claim rejection and it has been found that people often forget to nominate someone which can lead to an unfortunate situation when they pass away. To avoid rejection, keep nominee details up to date and keep an eye on correspondence from the insurer.
Delay in Filing a Claim
The delay in filing a claim will be a part of the claim rejection in life insurance. This is because the company will need to verify that the death was not sudden, accidental, or violent. The company will need to make sure that it was natural and not caused by any external factors. To avoid this, you should take out life insurance as soon as possible. You should also find out about your company’s policy for filing claims for life insurance.
Contestability Period
If the death happens shortly after buying a life insurance policy, your insurance company may find it suspicious. The contestability period will be a part of claim rejection in life insurance. As soon as a policy is bought, the contestability period comes into effect. The contestability period is the period from the date of issue of a life insurance policy to the date when the policy owner can challenge or dispute it. In case death occurs during the contestability period, your life insurer has all the rights to reject your death claim.
Claim Rejection Ratio of Life Insurance Companies
| Company Name |
Claim Rejection Ratio (Individual Death Claims) |
Claim Rejection Ratio( Group Death Claims) |
| Aditya Birla Sun Life Insurance Company |
0 |
0 |
| Aegon Life Insurance Company |
0 |
0 |
| Aviva Life Insurance Company |
0 |
0.01% |
| Bajaj Allianz Life Insurance Company |
0 |
0 |
| Bharti AXA Life Insurance Company |
0 |
0 |
| Canara HSBC Obc Life Insurance Company |
0 |
0 |
| Edelweiss Tokio Life Insurance Company |
0 |
0 |
| Exide Life Insurance Company |
0 |
0 |
| Future Generali Life Insurance Company |
0 |
0 |
| HDFC Life Insurance Company |
3.70% |
0 |
| ICICI Prudential Life Insurance Company |
0 |
0.04% |
| IDBI( Ageas) Federal Life Insurance Company |
0.05% |
0 |
| IndiaFirst Life Insurance Company |
0 |
0 |
| Kotak Mahindra Life Insurance Company |
0 |
0 |
| LIC Life Insurance Company | 0.31% |
0 |
| Max Life Insurance Company |
0 |
0 |
| PNB Metlife Insurance Company |
0 |
0 |
| Pramerica Life Insurance Company |
0 |
0.66% |
| Reliance Nippon Life Insurance Company |
0 |
0 |
| SBI Life Insurance Company |
0 |
0 |
| Shriram Life Insurance Company |
6.59% |
0.14% |
| Star Union Dai-ichi Life Insurance Company |
0 |
4.51% |
| Tata AIA Life Insurance Company |
0 |
0 |
Note: The above Individual, and the group claims rejection ratios information is based on IRDAI’s Annual Report.
Tips on Preventing a Claim from Being Rejected
We should always be mindful of the following tips to prevent a claim from being rejected in the future.
- Always make sure that we have our personal information updated on our insurance policy which includes our address and phone number.
- Check if there are any changes in our health status or lifestyle that may affect the cost of premiums or coverage, such as pregnancy, weight loss, new medications, etc.
- If we are taking a new medication for a chronic condition, it is important to notify our insurance company about it
- Pay your premiums on time to avoid policy lapse
- Keep updating your nominee/beneficiary details
- Don’t delay in filing life insurance claims
- Keep track of all medical appointments and treatments to keep up with what is covered by insurance and what is not covered by insurance so that we can maintain a clear record for reference.
Final Thoughts about Managing a Life Insurance Claim Rejection
The life insurance claim rejection is often a difficult process to manage. The key to managing a life insurance claim rejection is to take a step back and look at the situation from your insurer’s perspective.
Insurance companies are often hesitant to approve life insurance claims for those who have a pre-existing condition. This means that the applicant may not be eligible for coverage because of their medical history.
The best way to get around this is by purchasing an insurance policy from the best life insurance company. So compare the multiple life insurance plans from the different companies at the PolicyBachat to get the best life insurance policy.