New Delhi: Apart from saving some amount in the bank, all breadwinners of the family take measures to keep part of the savings in life insurance plans so that family members will not face financial distress in the future. And when people go for buying some life insurance plans, they feel that they are purchasing some peace of mind for the rest of their life.
However, some news reports about the rejection of a life insurance claim can be hard-hitting. But in many cases, such claims stand rejected because of ignorance of the policyholders.
So while it’s crucial that you choose an insurance plan that benefits in times of need, it is equally important that you know beforehand what instances can leave space for the rejection of insurance claim. However, here are some reasons why your insurance claims get rejected.
Death due to undisclosed pre-existing disease
This particular term people get to hear when it comes to life insurance. Simply put it this way, pre-existing diseases are defined as any ailments that the customer had either as symptoms or was diagnosed and received medical treatment for the same throughout the 48 months prior to the first policy issued by an insurance company.
When you are buying term insurance, it is very important to disclose your insurer about any kind of pre-existing diseases or any other medical condition. As it not only helps insurers to assess the related risk but also plays a crucial role in the insurance underwriting process. This information also plays a significant role when a customer wishes to attach some health-related riders/add-ons, like critical illness rider, with the basic term or life insurance plan.
However, if the insurer fails to declare the same to his/her insurer, it may restrict your beneficiaries from getting the claim proceeds.
Suicide within the waiting period
All the life insurance plans typically have a two-year exclusionary period for suicide. As per the policy terms, the pay-out will not be made if the insured commits suicide within one year of the policy commencement.
Moreover, in some cases, the insurer may pay back all or partial premiums to the beneficiary paid by the policyholder till the date of the death subsequent to deducting policy-related expenses, if any. In case of linked plans, the nominee is entitled to receive 100% of the policy fund value, however for non-linked plans the nominee gets 80% of the premium paid and not the full cover.
Failing to pay and let your policy lapse
Many times, people think that their work is done once the desired insurance policy is purchased. But this is only half the job done. Paying premiums on time and getting the term plan renewed is as important as applying for the insurance policy.
Life insurance companies typically offer policyholders a 30-day grace period for payment if you miss any payment and some companies extend it to 60 days. During that time your policy will still be in effect. Even after the grace period is up, you usually can get your term policy reinstated, but if the lapse has been lengthy you may need to undergo another medical examination.
In this matter, the most important thing to remember is if your policy lapses and is not in force when you die, your beneficiaries will not be able to claim it. Be it a term plan, endowment plan, ULIP or any other type of life insurance, once the policy lapses, it will cease to provide cover. It mainly means that the policy no longer exists. If one files for the claim of such a lapsed policy, this will only lead to rejection. However, it is essential to adhere to premium payment schedule to avoid any hurdle later.
Involvement in high-risk activities
Most life insurance policies have pages and pages of fine print, which include the types of activities for which a death benefit will not be paid. Such activities include extreme sports like bungee jumping, paragliding, skydiving etc. These activities are usually considered dangerous are excluded from the policy. While buying term insurance, one must know that death occurred due to participation in any kind of adventure activity will not be covered under the term plan.
Death Due to terrorist attacks
If an insured dies due to a terrorist attack then such deaths can’t also be claimed by the beneficiary. Though a policyholder can’t ensure to safeguard against such death they can always stay alert. You can try to avoid public places during national holidays where there are any chances of terrorist attacks.
Written By: Santosh Agarwal, Chief Business Officer- Life Insurance, Policybazaar.com