A term insurance plan is an ideal way to ensure that your loved ones don’t struggle financially in your absence. In the event of the term insurance policyholder’s death, the insurance provider makes a lump sum payment to the family of the deceased.
This payout can be used by them to cover their day to day expenses and for purposes they see fit. That said, in certain unfortunate circumstances the insurance provider may choose to reject the term insurance claim filed by the nominee of the deceased.
This article will help you get to know more about the different term plan claim rejection reasons that an insurer might give you.
A term insurance claim is generally lodged by the nominee of a term insurance plan in the event of the policyholder’s demise during its tenure.
It is basically a written demand from the nominee requesting the insurance provider to disburse the death benefit payout under the plan.
After successful verification of the details of the policy, the nominee, and the circumstances of the policyholder’s death, the insurance provider will pay the death benefit out to the intended person.
The simple answer is yes. A term insurance claim lodged by the nominee can be rejected by the insurance provider for a number of different reasons.
One of the most common term plan rejection reasons is when the claim is raised for an incident that is specifically listed under the ‘Exclusions’ of the policy. All incidents that are listed under it will not be covered under the policy, which will lead to term insurance claim rejection.
Here are a few incidents that are strictly strictly excluded from term insurance coverage.
Death of the policyholder due to undisclosed pre-existing health conditions or injuries
Death of the policyholder, where the nominee has a direct or indirect role
Death of the policyholder as a result of being under the influence of drugs or alcohol
Death of the policyholder due to them partaking in adventure sports like racing, paragliding, skydiving, bungee jumping, and rafting, among others
Death of the policyholder as a result of complications during childbirth, where the pregnancy has not been disclosed
Death of the policyholder by suicide
Now, let’s get to the main part of this article - why a term insurance claim gets rejected. There are quite a few reasons for claim rejections. However, in this article, we’re going to be taking a look at 5 of the most common ones.
When you’re purchasing a term insurance plan, you’re supposed to provide all material information in a truthful manner. Withholding or misrepresenting any information like your personal details, lifestyle habits, or professional details, among others can lead to the insurer rejecting the term insurance claim.
This is another majorly common reason why a term insurance claim is rejected. Not disclosing your pre-existing health conditions at the time of purchase of a term plan will surely lead to a claim rejection in the future.
Many policyholders fail to assign a nominee to their term plan, while others fail to update the nominee in the case of the premature death of the said nominee. In both cases, the insurance provider may choose to reject the term insurance claim.
When you don’t pay the term insurance premiums regularly on time as agreed upon, the policy may become inactive and may lapse. And in the case of lapsed policies, no benefits under the term plan are paid out and can lead to a rejection of the claim.
At the time of purchase of a term insurance plan, you’re also required to provide your insurer, the details of all of your existing insurance policies. Failing to do that can also be one of the many term insurance claim rejection reasons.
Although there may be many term plan claim rejection reasons, thankfully, there are ways through which you can avoid it. Wondering how? Check out the following tips that you can follow to prevent a term insurance claim rejection.
Make sure that your beneficiaries are aware of the entire term insurance claim process, including the documents required for making the claim.
Always provide complete, accurate, and truthful information at the time of purchase of a term insurance plan. Before submitting the proposal form, ensure that all of the details such as your personal information, medical information, and other policy details are accurately filled.
Remember to make all the premium payments on time within the due date.
If your policy has lapsed, talk to your insurance provider to see if there are any ways to revive the plan.
If a medical exam is mandated by the insurance provider, make sure to undergo the test as soon as possible.
Always provide details of the nominee at the time of purchase of a term plan itself. Also, if the nominee details have to be updated, make sure to do it immediately.
As long as you follow the above-mentioned tips to the tee, you don’t have to worry about term insurance claims being rejected at all. If you haven’t taken any steps to financially protect your family in the event of your absence until now, you must get going with it.
Head over to the Finserv MARKETS website and check out the life term insurance plans available. You can even compare the features and quotes of multiple plans and choose the one that you feel comfortable with. Thanks to a completely online and paperless process, you can get your term insurance policy within no time.
A term insurance claim is when you file a request with the insurance provider for the payout of the death benefit under the plan. This claim can only be filed by the nominee or the legal heirs of the policyholder and only upon the demise of the said policyholder.
A few of the most common reasons why a term insurance claim is rejected has to be non-disclosure of existing medical conditions, lapse of the policy due to non-payment of premiums, and inaccurate or misleading information.
Although not mandatory, filing a nomination for your term insurance plan is necessary. This allows your family to easily claim the death benefit payout under the term plan in a much quicker and hassle-free manner.
Yes. You can prevent your nominee’s term plan claim from getting rejected by ensuring that you disclose all material information, including your health conditions, truthfully and by paying all of the premiums on time within the due date.
A term insurance plan does not cover all kinds of scenarios. The scenarios that it doesn’t cover are termed as term plan exclusions. For instance, death of the policyholder by suicide is a term plan exclusion.