Every policy holder buys life insurance for the sole purpose of ensuring some corpus for his near and dear ones in the case of his untimely death. However, there can be occasions when the surviving family members receive a rude shock when the claim is rejected. This defeats the very purpose of buying the policy.

Therefore, it is important to know the various scenarios where the insurance company holds the right to reject your family's claim.

Contravention of policy clauses: Various important clauses come under this category that you should know

Suicide: Life insurance policies usually reject a claim if the policyholder's death is due to suicide within a specified period (generally one year) from when the policy comes into effect.

This is done specifically to reduce the moral hazard involved wherein policies are taken with such pre-determined intentions. However, any unnatural death occurring after this initial period is not rendered invalid.

Violation of good faith: Since insurance companies enter into a long-term contract with you, it is important that you give them the right information regarding your age, health, financial condition and others.

This is because if the insurer discovers at a later age that any information that has been provided to them is false or misleading, they can reject claims. However, there is an incontestability clause, which prevents the insurer from revoking coverage because of alleged misstatements by the insured after a specified period, usually two years.

But remember that it is not a license to commit fraud because the company can contest any claim in court and even pursue criminal charges. Misstatement of age is, however, considered a minor offence and the insurers normally adjust the payout according to the age.

Premium delays: The onus lies on you completely to make sure that the premiums are paid on time. Insurance companies provide a grace period of 15 to 30 days.

However, in the event of the death of the policyholder during this grace period, the company may treat this as a lapsed policy and not honour the claim.

Documentation: Besides premiums, paperwork is perhaps the most important reason to reject insurance claims. Here is an illustration of the kind of documentation that should be provided for a fool proof claim. First, it has to be made in writing and duly signed by the nominee/near relative. The following information has to be provided in it.

• Name of the insured
• Policy number
• Date of death
• Cause of death

For death claim, the following documents are required:

• Original policy document
• Original death certificate
• Completed claimant statement
• Last attending physician's statement
• Attested copy of first information report and post-mortem report (in case of death due to accident or unnatural cause)
• Photo ID and age proof of the nominee

The claim is normally settled within eight-ten working days. But, if the claim warrants further verification, the company has to complete its procedures within six months from receipt of the claim.

After six months, the company has to pay interest on the claimed amount. The rate and time period for which interest is paid is decided as per IRDA guidelines.

In case the nominee feels wronged, he can approach the insurance ombudsman for redressal of grievances. Here you need to remember there are certain processes you need to follow.

The complaint has to be in writing and addressed to the particular branch of the insurance ombudsman under which the office of the insurer falls. However, before that there are a few steps you have to follow:

A representation has to be made to the insurer and if the insurer rejects or does not respond for a month or the reply is unsatisfactory

The complaint has to be made within a year from the time of rejection

The same complaint should not be pending before any court, consumer forum or arbitrator

The ombudsman shall pass an award within a period of three months from the receipt of the complaint.

The awards are binding upon the insurance companies. In case you are dissatisfied with the award, you can approach other avenues like consumer forums and courts of law for redressal of grievances.

The writer is a certified financial planner.