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What happens if an insurer rejects a life insurance claim? It can drastically affect the lives of the claimants, particularly if they are dependents of the insured who is the sole bread earner of a family. Proper planning and awareness about policies can help avoid this situation. So, before you buy a life insurance policy, check the reasons that can result in claim rejections. These include:
False information: Concealing some critical information— at the time of buying the policy—related to medical conditions or personal details like age, height, weight, or income to get higher insurance coverage can lead to insurance claim rejection.
Payment of premiums: A life insurance is active only when you pay premiums on time. Insurers provide an extension of 30 days to make the payment, in case of delays. Anup Bansal, chief business officer, Scripbox, said “the policy lapses if the policyholder fails to pay the premium within the grace period."
Contest period: Insurers can reject a claim if the policyholder dies within two years of taking the policy. If the insured dies during this two-year period, insurers review your coverage for misrepresentations during the application process before processing the claim.
Nominee details: Policy buyers typically name their parents as nominees. However, as they grow old, the insurer can reject the claim if the parents are deceased when the claim arises. Therefore, policyholders should update details of their nominees regularly.
Other cases:Insurers don’t cover deaths due to pre-existing health conditions, natural disasters, terrorist attacks or homicides, or if the insured was involved in hazardous activities.