There are many scenarios where the policyholder’s nominees have had their claims rejected by insurers. While it may have been a shock to them, there are always well-defined reasons behind the same at the insurance company’s end. Here are some insights on the key reasons behind such rejections and the steps you can take as a policyholder to minimize them and ensure that your beneficiaries receive the financial assistance you wish for them.

Reasons for claim rejection and how to avoid them in the first place

Before purchasing your policy, you must thoroughly compare various insurance plans in the market. You must also have calculated your total premium payment and expected returns using the various online life insurance calculators. However, many people do not put the same emphasis on filling up their insurance forms and also skip reading their policy documents.

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Suppose Krishnan Sharma has a life insurance policy with a sum assured of Rs. 50 lakh. In this case, due to his untimely demise, his family files a claim for receiving this amount. However, the claim is rejected since his name in the policy document is Krishnen Sharma (misspelt). Many such cases happen on account of these minor discrepancies.

Here are some of the most common reasons behind the rejection of claims and how you can avoid them outright.

• Lack of awareness – Many policyholders do not read through the list of inclusions and exclusions. They remain unaware, and as a result, their nominee(s) end(s) up filing claims for events that are not covered by the policy. It equates to a serious breach of the terms and conditions of the insurance policy agreement. Additionally, several things, like waiting periods, should be kept in mind if your policy has a critical illness rider. You should carefully read the policy document while getting the plan.
   
• Not revealing authentic information – Many people do not fully disclose vital information like their income, educational qualifications, age, occupation type, any existing insurance policies, pre-existing health/medical issues, etc. Coverage is given based on the details you provide in the insurance proposal document. Any gaps may lead to claims being rejected by the insurance company once it finds the actual facts. Be totally honest while applying for your insurance policy. Do not conceal anything since you do not want a future scenario where the claim is denied on these grounds.
   
• Proposal form disparities – There may be several gaps in the proposal form if agents or third parties fill them. This may lead to serious issues for declarations since the policy is underwritten with the wrong information. Whenever any claim is filed, the insurance company will verify the details, and naturally, the claim is very likely to be rejected if there are any loopholes. The best solution in this regard is to fill up and check the proposal form by yourself instead of depending on any third party. Always provide authentic documents while buying your policy. Whenever you receive the document with the application form photocopy, check if there are any errors. If there are any discrepancies, immediately contact your advisor or insurance company to rectify the same. In case you are buying the policy online, make sure to double-check everything before submitting it.

These are some common reasons why insurance companies end up rejecting consumer claims. While it is their duty to honour their commitments, they also have to uphold standards of transparency. This means that only genuine insurance claims can be honoured. That is where the policyholder also plays a part in the proceedings.

A key metric you can look at before purchasing your insurance policy is the company’s claim settlement ratio. It is the number of claims settled by an insurer in a fiscal year against the total number of claims received in that year. It is typically represented by a percentage. You need to look for a higher claim settlement ratio, as it will signify a higher chance of settling your nominees’ claims.

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Some critical details that you should know about

As per the Insurance Act, 1938 any life insurance policy claim (those held for at least two years) may be rejected if the insurance company proves that the policyholder had suppressed any material information or gave inaccurate and wrongful details while buying or renewing their policy.

The industry rules are that insurance companies should settle and honour claims within thirty days of receiving all the documents. If any added verification is needed, the insurance company should finish all these procedures within six months from the claim’s written intimation. If the insurer does not settle any claim within these six months, it will have to pay interest on the amount payable to the customer.

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Conclusion

Here are some key takeaways that you should remember while purchasing or renewing your insurance plans:

• Always buy insurance directly from a reputed insurance company or advisor/agent. Do not forget to check the claim settlement ratio of the insurer.
• Make sure that you fill-up the insurance proposal form yourself and double-check it before submission
• Provide all genuine documents as required
• Do not conceal or suppress any facts since it may lead to claim rejection
• Make sure you double-check the application form photocopy you get with the policy document afterwards. If you find any errors, then notify your insurance company immediately to fix the same.

These things will keep your nominees safe from claim rejections in the future. Therefore, investing a little time and effort into the process while purchasing an insurance plan is vital.

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