You have agreed to obtain a term insurance plan to protect your family’s financial destiny in case of your untimely demise. But do you know the insurer may reject your term insurance claim for various reasons? If that happens, your nominees may face many difficulties in claiming the benefit, which can be overwhelming during difficult times.
To avoid such a situation, it is important to know the common reasons for term insurance claim rejections and how to prevent them. This piece explains the details of the term insurance claim process and the parameters that may lead to claim rejection along with the steps you can take to ensure your nominees receive the policy benefit hassle-free.
What is the Term Insurance Claim Process?
The term insurance policy claim process is the procedure that the nominee or the beneficiary of the policy has to follow to receive the death benefit from the insurer in case of the policyholder’s death during the policy term. The term insurance claim process involves three steps:
- The nominee or beneficiary must promptly inform the insurer about the policyholder’s passing. They should provide the policy number, the date and cause of death, and any additional information requested by the insurer. Additionally, they should complete and submit the claim form, accompanied by the required documents. This can include the death certificate, proof of identity, banking information, and other requisite details.
- Once the insurer gets the claim application and documents, they will verify the information and check if the claim is valid and genuine. They may also investigate or ask for additional documents if they find any discrepancy or suspicion in the claim. The insurer will then approve or reject the claim based on their findings.
- If the insurer approves the claim, they will pay the death benefit to the nominee or beneficiary as per the chosen payout option. The payment can be in a lump sum, monthly or in the form of annual income. There is also an option for a combination of lump sum and recurring payouts. The insurer will also issue a discharge voucher to acknowledge the settlement of the claim.
What are the Common Reasons for Term Insurance Claim Rejection?
Term insurance claim rejection means that the insurer denies paying the death benefit to the nominee or beneficiary due to some reason. Some of the common reasons for term insurance claim rejection are:
This is one of the most frequent and serious reasons for term insurance claim rejection. Suppose the policyholder has not disclosed or misrepresented any critical information, such as age, income, occupation, health status, medical history, smoking or drinking habits, and existing policies when buying the policy. In that case, the insurer can reject the claim for fraud or breach of contract.
To avoid such risks, undergoing medical tests and providing accurate information in the proposal form of the policy is of paramount importance.
Delay in Premium Payment
Another common reason for term insurance claim rejection is a delay in premium payment. If the policyholder fails to pay the premium on time, the policy may lapse and become inactive. In such a case, no death benefit will be payable to the nominee or beneficiary. Therefore, it is advisable to pay the premium regularly and on time and avoid missing due dates on priority.
Every term insurance policy has certain exclusions that are not covered under it. These exclusions may vary depending on the policy and the insurer. Some exclusions include suicide within one year of policy inception or revival, death due to war, terrorism, riots, or civil commotion. Participation in hazardous activities or sports, pre-existing diseases or undisclosed conditions at the time of policy purchase all fall under non-covered causes. If the policyholder passes away due to any of these excluded reasons, the insurer has the right to reject the claim.
How to Ensure that Your Term Insurance Claims Never Get Rejected?
To ensure your loved ones receive the term insurance benefits, consider the following:
- Always pay your premiums on time. A lapsed policy can lead to claim denials.
- Maintain detailed records of all policy-related documents, including premiums paid, communication with the insurer, and policy updates.
- If there are changes in your life, like marriage, the birth of a child, or a change in health status, inform your insurer promptly. Outdated information can jeopardize claims.
- Stay on top of your health with regular check-ups. This shows your commitment to maintaining good health.
- Ensure that your policy remains active. Keep track of renewal dates and renew on time.
- Be aware of what your policy doesn’t cover. Take additional coverage if needed.
- Keep your beneficiary information up to date. This ensures the right people receive the claim amount.
- Periodically review your policy. Adjust as necessary based on your financial objectives.
Term insurance is a vital financial tool that can secure your family’s future in case of your untimely demise. However, be careful and responsible while buying and maintaining your term insurance policy to avoid any claim rejection. By following the tips above, you can ensure that your term insurance claims are never rejected and your family receives the death benefit without hassle.