In What is a claim settlement ratio, we explained the importance of selecting a life insurance company that is known to settle a high percentage of its claims. However, the responsibility also rests with you to ensure that you play it right.
Here are four common reasons why your claim could get rejected.
1) Non-disclosure of facts
The policy document is based on facts and information provided by the policyholder. Any misstatement or incorrect data provided by the individual at the time of buying the policy could lead to the claim being rejected. For instance, if death takes place due to a pre-existing medical condition that was not reported at the time of purchase of the policy, the claim could get rejected.
Be honest. It will hold you in good stead.
2) Death due to certain circumstances
Listed below are some incidents which, if resulting in the death of a policy holder, put payment to the beneficiary into doubt:
- Drug overdose
- Addiction or misuse of non-prescription drugs
- Death in an accident where the policy holder is found to be intoxicated
- Suicide
- If the cause of death mentioned on the death certificate is ‘homicide’, then the insurance company will follow up with the police investigation to ensure that the beneficiary is not a suspect. If yes, then the payout will be held back until the charges are dropped or the beneficiary is acquitted.
Also check for death due to war and terrorist activities.
There are numerous instances where the death of the policy holder will bring into doubt the payment to the beneficiary or may result in just part payment. Be sure you are well aware of what they are.
3) Time of death
If death has occurred right after the policy has been taken, it will be viewed as extremely suspicious by the insurance company. In such an instance, payment will most probably not be made. Even if death occurs within a year or so of taking the policy, the insurance companies tend to be mistrustful.
Worth noting is that life insurance companies have a contestability period which could range from 12 months to 2 years. The clock starts ticking as soon as a policy goes into effect. During this period, the company can cancel the coverage and return the premium if they believe that the policy holder has withheld crucial information or has deliberately lied. When you take out a policy, check whether death occurring during this period will be an issue.
4) Policy has lapsed
Be regular with your premiums. If, by any chance, you have not paid up and your policy has lapsed, then there is no way the insurance company is obligated to make the payment to your beneficiary. If you miss a premium payment, look out for the grace period. If you have missed that, then talk to the company to once again re-instate your policy on making a penalty payment.
