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 of a death benefit payout. This money will help your family handle major and necessary expenses without facing economic uncertainty.
However, the death benefit is given to the policyholder’s family only in the event of their demise. Your nominee needs to file a claim to gain compensation. However, there is a chance that the claim could be 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.
What is term insurance?
A term plan is a type of life insurance policy. When you invest in this policy, your insurer will compensate your family with a sum assured. This amount is paid if the policyholder passes away during the policy term. If they survive the time of the policy, there will not be any sum assured nor any maturity benefits. There are different types of term plans that provide additional benefits to policyholders.
What is a claim?
To access one of the term insurance benefits, the payout, you must file a claim against your policy. The claim is a formal note informing the insurer about the policyholder’s demise. The person filing the lawsuit, usually the nominee, must disclose all the details related to passing away for the claim to be accepted. Once all the requirements are met, the insurer will compensate the policyholder’s nominee.
What are the reasons behind claim rejection?
Listed below are a few reasons 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. 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. This could be related to your health, financial condition, or other factors.
2. Absence of nominee
One of the important details when investing in a term plan is adding a nominee. A nominee is a person related to the policyholder. If the policyholder passes away suddenly, the nominee will complete all the formalities related to the plan. 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
To continue enjoying term insurance benefits, you must continue with the premium paid for the plan. This ensures that your project remains operational. However, if you default on the costs, your project will lapse and become void after a point. The insurer will reject the claim if the nominee files a lawsuit against a lapsed policy.
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 the 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 the rejection of claims based on non-disclosure of information a bit difficult. The insurer cannot reject the claim if the policy is over three years old. 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 must pay a certain amount of interest.
These are related to the claim rejection process and all the changes made in regulation. Contact your insurance advisor if you want to know the term plan’s benefits.
