Life insurance offers financial support to surviving dependents or other beneficiaries after the death of an insured. While it serves as the best possible tool for the coverage of loans and mortgages availed by the policyholder, there are certain incidents that may lead to rejection of life insurance claims.
One must ensure that the following situations are avoided to ensure any unpleasant surprises during the claim process (Compiled by Rakesh Goyal, Director Probus Insurance, Insurtech Broking Company):
Irregular premium payment
Failing to pay the premium on time could be one of the reasons for the rejection of life insurance claims. The life insurance plan is only active if the premiums of the plan are paid on time.
Missing on payment of premiums may lead to policy lapse. The insurer might then deny the claim made for such a lapsed policy. Some insurance companies even offer a grace period for the payment of the premiums.
Failure to update nominee
It is essential to appoint a nominee or update the nominee (when required) as the claim is paid only to the nominee appointed for the life insurance plan. Missing this factor may result in a delay in the claim settlement process or denial under certain cases.
Every insurer has a certain contestability period. If the insured dies within this period, the insurer has the complete right to reject the death claim. A proper investigation is carried out to check if the insured has provided appropriate information while applying for the plan.
Type of death
The life insurance plan doesn't cover all types of death. There are certain standard exclusions too. Any death occurrence which is a part of the exclusion would not be covered and may lead to claim rejection.
Providing false information is also one of the common reasons for the rejection of a life insurance claim. Providing incorrect information might help someone to reduce the premium cost, but this situation might lead to denial of the claim later.
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(Edited by : Jomy)
First Published: IST