When you invest in term insurance, you are investing with the belief that a policy helps your loved ones financially in your absence. The financial assistance is provided in the form a death benefit pay-out. This money will help your family in taking care of major and necessary expenses without facing financial uncertainty.
However, the death benefit is given to the family of the policyholder only in the event of their demise. Your nominee needs to file a claim in order to gain the compensation. However, there are chances that the claim could get rejected. Read on to know more about why claims could get rejected and what you should be aware of regarding the claim procedure for your term plan.
A term plan is a type of life insurance policy. When you invest in this policy, your insurer will pay your family with sum assured as compensation. This amount is paid if the policyholder passes away during the term of the policy. If they survive the term of the policy; there will not be any sum assured nor any maturity benefits. There are different types of term plans providing different benefits to the policyholder.
What is a claim?
In order to get access to one of the term insurance benefits, which is the pay-out, you need to file a claim against your policy. The claim is basically a formal note to the insurer that informs them about the demise of the policyholder. The person filing the claim, which is usually the nominee, must disclose all the details related to passing away, in order for the claim to be accepted. Once all the requirements are met, the insurer will compensate the nominee of the policyholder.
What are the reasons behind claim rejection?
Listed below are a few reasons as to why your claim could get rejected:
1. Giving false information
When you invest in a term plan, your insurer expects you to disclose all the information without hiding anything. This could be related to your health, your financial condition, or other factors. If you hide or provide false information to your insurer, chances are that your claim could get rejected if the information is found to be unverified.
2. Absence of nominee
One of the important details when investing in a term plan is the addition of an nominee. A nominee is the person who is related to the policyholder. In the event that policyholder passes away suddenly, the task of completing all the formalities related to the plan falls on to the nominee. However, if the policyholder has not nominated anyone or fails to update information related to the nominee, the insurer might instantly reject the claim.
3. Policy getting lapsed
In order to continue enjoying term insurance benefits, you need to continue with the premium payment towards the plan. This ensures that your plan remains operational. However, if you default on the payments, after a point, your plan will lapse and become void. If the nominee files a claim against a lapsed policy, the insurer will reject the claim.
What are the exclusions of term insurance?
Insurers exclude the following situations from the coverage of the term plan:
- Death of the policyholder due to suicide
- Death due to undisclosed health conditions or pre-existing health conditions
- Death due to alcohol or drug abuse
- Death due to participation in adventure sports
What should you remember when filing a claim?
There are a few basic things that you can do to make your claim process easier. Disclosing all pre-existing medical conditions, paying premiums on time, and getting nominee registered are just a few things that can be helpful for you. This will ensure that your claim does not get rejected.
Recent changes in rules have made rejection of claims on the basis of non-disclosure of information a bit difficult. If the policy is more than 3 years old, the claim cannot be rejected by the insurer. Also, the time required for documentation has been reduced to 15 days, and the investigation related to the claim has to be completed within 90 days of filing a claim. If there is any delay in compensating the nominee, the insurer is required to pay a certain amount of interest.
These are the things related to claim rejection process and all the changes made in regulation. If you want to know what term plan and all the benefits is related to it, you should get in touch with your insurance advisor.