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5 reasons why insurance claims get rejected

Last updated on: May 9, 2013 14:15 IST

5 reasons why insurance claims get rejected

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Ramalingam K

Avoid these pitfalls to ensure your family's financial security.

How many times have you asked yourself: Will the insurance company for which I am paying premiums regularly settle or reject the claims in case of any mishap? Will my family get the claim benefits or not?

An insurance policy could be the financial security for a family if the breadwinner passes away. This financial security becomes a reality only when the insurance companies settle the claim in a hassle free manner. If the claim gets rejected the financial security of the policyholder's family becomes bleak. But have you ever thought why insurance companies reject claims?

Insurance policies are issued based on the facts and information provided by the policyholder in the proposal form while signing for the policy. If s/he has not provided adequate information or hid any information in the proposal form then it leads to claim rejection.

How to avoid claim rejection?

If you follow the steps listed here while taking the policy, it will not only help you avoid claim rejection but also ensure your family's financial security.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the director and chief financial planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.


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5 reasons why insurance claims get rejected

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Trusting your insurance agent blindly

While buying an insurance policy we are always in a hurry and want things to happen in a jiffy. We never read the proposal form completely and fill in all the details required in the form.

We just sign the form and ask the insurance agent / advisor to fill the details required and issue a cheque to the agent. This is a wrong practice. The agent may not know all the requisite details about you and the medical history of your family. S/he may fill some incorrect information and submit the form to meet her/his sales targets.

Also don't think that the agent is doing a favour to you by overlooking your health problems.

Always fill the form by yourself and keep a copy of the form. Verify the details printed in the policy document with the copy of the details filled.

If you found any discrepancy inform the insurance company immediately to rectify it.

Insurance also needs the same amount of time and interest we apply while investing in like real estate, mobile phones, cars etc. We never allow a showroom guy to choose a mobile phone for you, likewise don't allow an insurance agent to fill the forms for you.


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Giving incorrect information in the application form

It is our duty to disclose all the required information to the insurance companies. If you hide some facts and don't maintain transparency then your claim may be rejected.

To avoid this always furnish the correct and true information like your age, height, weight, occupation, income, existing policy details and any other details asked for in the form. Mostly we don't reveal the details of other policies we hold. It takes some time to gather the details of the existing insurance policies.

For that reason mostly we hide these details. This can be avoided and furnish the complete information about your existing insurance policy details to avoid any claim rejection in future.


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Hiding medical history

The most important part in the proposal form is the details of medical history of the proposer and her/his family. Based on this information the insurer will arrive at the premium to be charged and whether the policy can be issued or not.

Disclose all the relevant facts regarding your and your family's medical history. It is also important to disclose the habits pertaining to consumption of alcohol and tobacco. Be honest in declaring these details to avoid the claim rejection.


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Avoiding medical tests

Based on the information provided in the proposal form underwriter will assess the risk and the policy will be issued. Sometimes for a higher sum assured policies and term insurance plans you need to undergo some medical tests compulsorily.

Don't avoid such medical tests. This will reduce the chances of a claim being rejected on the basis of pre-existing diseases.

Now update the nomination and help your beneficiaries get the claims faster.

We bought life insurance mostly for tax saving purpose and not worried much about the nomination. Usually we nominate our parents when we are unmarried and fail to update the nominee's name after marriage. It may happen at the time of claim settlement that both the policyholder and nominee may not be alive.

Usually nominees are not changed frequently. But it is important to update the nominee details if there is any change in nominee or in case the nominee passes away earlier than the life assured. Here the claim may not get rejected but to follow certain legal formalities to get the claim.


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Policy lapse: The biggest threat to claim settlement

You will get the claim only when the policy is in force. It is more important to pay the premiums on or before due date. Insurance companies provide some grace days if you fail to pay the premiums on due date.

Claim will not be paid if the policy is not renewed within the grace period and something happens to the policyholder the next day after the grace period is over.

If you take care of the pointers mentioned here and avoid claim rejection, your family will achieve its financial goals for sure even if you are not around.


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