If you are looking to buy an insurance policy, do note that most errors happen at the time of filling the proposal form. In 2014, Suresh Rathore (name changed) from New Delhi trusted his insurance advisor to fill the proposal form. The advisor filled incorrect/incomplete information in the form and submitted the same to the insurance company. Rathore had purchased a Rs 1 crore term insurance policy to meet his family expenses in case of his sudden demise.
In January last year, Rathore’s health condition deteriorated and he passed away. His spouse Deepti (name changed) applied to the life insurance provider for claim against the term insurance policy purchased. But the claim was rejected by the insurance company, citing incorrect information of his pre-existing disease in the proposal form.
Mahavir Chopra, Director - Health, Life & Strategic Initiatives, Coverfox.com said, “The probability of claims getting rejected is higher if incorrect or incomplete or concealed information gets submitted to the insurance company in the proposal form. One must remember that a term or life insurance plan is going to be issued on the information provided in the proposal form and it will form part of the contract.”
Santosh Agarwal, Associate Director and Cluster Head- Life Insurance, Policybazaar.com, cautioned, “Filling up wrong information intentionally or unintentionally can be a cause for claim rejection. We recommend a thorough review of the proposal form while buying an insurance policy.”Percentage-wise breakdown of life insurance claims rejected by some of the private insurance companies in the last three years:
Source: IRDAI Report
Let’s discuss the 4 common reasons for rejection of life insurance claims:1. Hiding medical history, lifestyle and family information
Pay special attention to sections related to lifestyle, medical and family history. Chopra advised, “Do not miss or hide information related to your health and lifestyle, especially smoking and alcohol-related questions. In case you consume cigarettes occasionally, you cannot declare yourself as a non-smoker in the proposal form.”
Agarwal added, “Hiding wrong deeds like smoking or alcohol consumption just to pay a low premium will definitely lead to a claim rejection. Hiding any medical history with the fear of the policy getting rejected can be a cause for claim rejection.” It’s important to inform the insurer in case of any lifestyle or medical changes like if you start smoking.2. Concealing pre-existing diseases
“This information plays a significant role when a customer wishes to attach some health-related riders/add-ons, like critical illness rider, with the basic term or life insurance plan. Being a health-related cover, it is very important to disclose any pre-existing condition,” said Chopra. Currently, new term insurance plans come with inbuilt critical illness benefits.3. Delay in claim filing
Chopra cautioned that delay in filing the claim beyond a stipulated period could raise unnecessary suspicion. "The insurer can call for prolonged investigations.” Such activities can take an additional time and can be a cause for claim rejection.4. Policy lapse
The first criteria for getting your claim approved is that the policy should be in-force. Chopra said, “You must always pay your premiums on time to keep your policy in force. An insurer will reject your claim if your policy has lapsed due to non-payment of premiums.” If due to any unavoidable circumstances you miss the due date of your premium payment, you should pay for the same during the grace period. If a claim is made even a day after the policy lapses, the insurance company will reject the claim.