Key promise of Insurance Policy is paying Insurance claim in case of occurrence of insured event. Life Insurance is bought for the dependents who were financially dependent on the insured person. It is said that financial loss can be compensated but emotional loss cannot be compensated.
The insurance business works on the trust which is built on timely payment of claim when the need arises. In case the claim is repudiated then the public loses trust in insurance as a system and everyone suffers.
In these 10 Situations your life insurance claim may get rejected by insurance companies:
- Suicide Deaths: In case suicide takes place in the first 12 months of new policy then the Insurance Company would not pay the claim but may refund the paid premium. This exclusion is done to avoid the moral hazard which means that no one should buy insurance with the purpose of committing suicide.
- Non-disclosure of material facts: Material facts are those facts which affect the occurrence of an insured event like medical conditions, habits like smoking, hobbies like adventure sports, occupation like fire worker. In case these facts are not disclosed then the insurance company may reject the claim even if the cause of death is not the same.
- Occupation Hazards: Insurance contract is taken on the basis of declarations in the Proposal Form and underwriters evaluate the risk on the basis of occupation hazards. However, there is no need to declare the hazards post the issuance of the contract. Insurance Company cannot deny the claim if the insured has taken a hazardous occupation after the issuance of insurance.
- Smoking/Tobacco Consumption/Alcohol: All these habits can lead to claim repudiation if it was not declared at the time of policy issuance. However, if the insured has begun any habit post-contract the claim cannot be repudiated.
- Breaking the Law: Death due to the commission of a crime or breaking the law of the land can lead to the policy holder’s claim lead to the insurance holder not getting any payouts from the insurance company as well.
- Death outside India: Insurance plans remain valid even after the policyholder changes his country of residence. The insurance company in such a situation must be notified if the policyholder wishes to settle abroad. This can involve informing the company about the new country of residence in order to claim the settlement later.
- Terrorist Attacks: Insurance Contract is a universal contract and covers death under all circumstances. There is no exclusion of the terrorist attacks. However, there is a delay due to the non-availability of the Death Certificate, FIR and other evidence. In case all details are available then the claim would be paid.
- Natural Calamities: As said earlier, all contracts are universal and cover death under all-natural calamities. The problem happens only if documents are not available like the death certificates and confirmation by authorities. Many times, insurance companies release the part payment as compensation and do final settlement after receipt of documents.
- Adventure Sports: Death from taking part in adventure sports such as bungee jumping, powerboat racing, skydiving, or motorsports are covered if it was declared at the time of policy commencement.
- Homicide: The insurance company has the right to withhold or reject the claim if the nominee is accused of homicide (murder) until criminal charges are dropped or the nominee is acquitted.
Having life insurance in place is the best way to secure not only your future but also those of your loved ones as well. However, an oversight or a mistake on your part in filling up the form can leave you vulnerable. Thus, it is important to know the grounds on which your claim can get rejected, so you know what you are signing up for.