Life Insurance provides a safety net for the family in case something happens to their breadwinner. It can help pay off debts and provide financial stability. Life insurance is also important for anyone who has dependents, like children, parents, or other family members who rely on them financially. It can be hard to think about life insurance as an investment when it’s so expensive but it’s a necessary expense that can save your loved ones from financial ruin if something were to happen to you.
A life insurance claim is important for people who are not financially stable. When you buy a life insurance policy, claim settlement is the first concern you would get in your mind. But what happens when your claim is rejected? This article will explore some of the best alternatives to life insurance if your claim is rejected. Before we go ahead with alternative options, let us know what type of claims are usually made and the reasons for rejecting your claim in detail.
Types of Life Insurance Claims
A life insurance claim is a process that a beneficiary must go through to receive benefits from an insurance policy after the death of the insured. A life insurance claim is a process where the beneficiary of the policy submits a request for settlement of a death benefit. The claim is usually made by applying to the insurance carrier. The most common types of life insurance claims are:
- Death Claims: These claims are filed when someone has died and there is no dispute about whether or not they were covered by the policy.
- Maturity Claims: Maturity claims are the survival claims that are made when the policyholder survives the entire policy period or term. The chances of your claim getting rejected are very low in these types of policies.
- Rider claims: Life insurance offers various riders such as critical illness benefits, accidental disability riders, and other add-on benefits. Rider claims are made when any unfortunate event happens to the insured. For different life insurance riders, different claim proceedings are required. Some of the rider claims are
- Disability Claims: These claims are filed when someone becomes disabled and unable to work due to an illness or injury.
- Terminal Illness Claims: These claims are filed when someone has been diagnosed with a terminal illness and will die within 12 months or less.
Main Reasons for Life Insurance Claim Rejection
Life insurance claim rejection is a common issue for many people. They are paying premiums every month and when they need the money, their claim has been rejected. This is because of many reasons like fraud, inadequate information on the application form, etc. Below are the main reasons for life insurance claim rejection.
- Delay in Premium Payments: Premium payment is a necessary cost for the insurance company. A life insurance policy is active only if premiums are paid on time. If you miss paying a premium the policy may lapse and an insurer can deny a claim for a lapsed policy. For example, if you have been making regular payments, but missed one payment and then made it up, this may be considered an irregularity and may lead to your claim being rejected. So if you are going to make a claim, you should always make sure that your premium is paid on time so that your claim will be approved.
- False Information: An insurance policy is an agreement between the insured person and the insurance company. The insurance industry works on trust and proper rules. False information can lead to a life insurance company denying coverage. There are various ways that false information can be introduced in an application for life insurance. The applicant may not have disclosed their medical history, smoking and drinking habits, etc. The applicant may have misrepresented their age, height, weight, and other relevant factors. Hiding information can lead to the rejection of a claim. So, It is very important, to be honest, and alert while filling out the application form to save your family from unnecessary hardships.
- Avoiding Medical Tests: Medical tests are an integral part while buying a life insurance policy. They are used to diagnose and verify the severity of a disease or injury. This process can take anywhere from a few days to a few weeks. The medical test results will determine whether or not you will be eligible for a life insurance policy. If you have had a medical test and it has shown that you are likely to develop a serious illness in the future, then your life insurance company may refuse to pay out your policy when you die. So, medical health history takes place a chance of your claim getting rejected by the insurer.
- Unentitled Nominee Details: The nominee is the person who is nominated to receive the proceeds of the policy. If there are no nominees, or if all the nominees die before the policyholder, then the insurance company will pay out to their legal heirs. But an insurance company may reject the claim if no nominee is updated and a legal heir cannot be decided to their satisfaction. So, the nominee has a significant role in claim rejection and it has been found that people often forget to nominate someone which can lead to an unfortunate situation when they pass away. To avoid rejection, keep nominee details up to date and keep an eye on correspondence from the insurer.
- Type of Death: Type of death can have a huge impact on the life insurance claim process. This is because death is a critical event in life that can lead to financial hardship for the family members. Not all types of deaths are covered by life insurance. According to statistics, people who died from suicide and pre-existing diseases and hazardous activities causes are more likely to be rejected for their life insurance claim.
- Delay in Filing a Claim: The delay in filing a claim will be a part of the claim rejection in life insurance. This is because the company will need to verify that the death was not sudden, accidental, or violent. The company will need to make sure that it was natural and not caused by any external factors. To avoid this, you should take out life insurance as soon as possible. You should also find out about your company’s policy for filing claims for life insurance.
- Contestability Period: If the death happens shortly after buying a life insurance policy, your insurance company may find it suspicious. The contestability period will be a part of claim rejection in life insurance. As soon as a policy is bought, the contestability period comes into effect. The contestability period is the period from the date of issue of a life insurance policy to the date when the policy owner can challenge or dispute it. In case death occurs during the contestability period, your life insurer has all the rights to reject your death claim.
Alternatives if Life Insurance Claim is Rejected
If your claim is rejected for any reason you need to choose the alternative option to get the claim amount. However, there are various legal ways to deal with these denials.
Approach Insurance Ombudsman
If you have a life insurance claim that is rejected, it is important to know what your options are. One of the best things you need to do is to contact the ombudsman. To resolve your insurance grievances, the government has appointed an ombudsman. Recording every detail will make it much easier to build a commitment case against the company. If the ombudsman rejects your claim as well, then you should consult a lawyer.
Note: The insurance ombudsman only handles complaints with a life insurance claim of less than Rs. 30 Lakhs, while the complaint regarding a critical illness and other claims of less than Rs. 20 Lakhs are considered.
Report to IRDAI
If not satisfied with the insurance company’s response, you can report to the Insurance Regulatory and Development Authority of India (IRDAI) the insurance regulator. The complaint can be filed by contacting the customer care number or through an email or registered through their online portal, Integrated Grievance Management System (IGMS). You can also courier or post your complaint registration form with a letter and necessary documents to the General Manager of the Consumer Affairs Department- Grievance Redressal Cell, IRDAI.
Approach Consumer Forum or the Court
Approach the Consumer Forum or Court if you are still unsatisfied with the insurer’s decision. Approaching Consumer Forum or the Court I the last chance alternative option to get the claim. They will review your eligibility for coverage and decide whether or not you should be covered by this plan. You can also directly approach the court to help settle your claim. Though it’s not compulsory to approach insurance ombudsmen before you knock on the door of the consumer court.
Conclusion
The life insurance claim process is little complicated thing. If your life insurance claim is rejected, the most important thing is don’t panic about that. It may seem like a huge blow but it’s not the end of the world. There are various alternatives that you can explore and work towards. Keep calm and follow all the steps carefully to get desired results. You can consult an insurance agent or financial advisor for more information, and make sure you prepare all the necessary documents.