Reasons Why Insurance Claims May Get Rejected
If there is even the slightest discrepancy in the information that the policyholder has provided, the insurer will be well within it’s right to reject any claim that is raised under the policy.
Updated: Feb 28, 2018 13:31:08
The concept of insurance, in general, is a contract between an insurer and the insured, based on a number of principles. One of those principles basically establishes that both parties involved in the contract must act with utmost good faith. To say it in simpler terms, the policyholder must exercise complete honesty and accuracy when providing information to the insurer, who is also responsible for being honest and transparent in their service to the former.
However, while this may be the right thing to do, many policyholders tend to forget this very principle and end up providing their insurer with incorrect or incomplete information. That, in most cases, leads to a rejection of their claim, be it for a life insurance policy, a health insurance plan, or even a motor insurance plan. That is just one of the many reasons why insurance claims get rejected. Here, we will shed some light on the other reasons which can earn you a rejection on your insurance claim.
Reasons For Life Insurance Claim Rejection
Policy purchased without due consideration - Many people buy life insurance either in a hurry during the tax season, or without due consideration, outsourcing the job to an agent. In both these cases, chances are high that the policyholder is not fully aware of the policy coverage details and exclusions. As a result, when a claim is raised without full knowledge about the policy’s coverage, the claim is very likely to be rejected.
Incorrect information provided - The principle of good faith is a very important clause in the contract of insurance which requires the policyholder to disclose all information that the proposal requires. If there is even the slightest discrepancy in the information that the policyholder has provided, the insurer will be well within it’s right to reject any claim that is raised under the policy.
Details regarding occupation - The applicant’s occupation is a major factor taken into account during the insurance underwriting process. Depending on the level of risk attached to one’s occupation, the insurer can charge premiums accordingly, or in some cases, even deny cover altogether. If you have provided incorrect or false information regarding your profession, the insurer can reject your claim.
Non-disclosure of medical history details – An applicant’s medical history details are crucial in the insurance underwriting process. If there is any discrepancy found in those details after the policy coverage has commenced, any claim raised is very likely to be rejected.
Death due to uncovered causes – Claims following death due to reasons such as suicide, drug overdose, drunk driving, outside geographical scope of the policy, during war/war-like situations, etc. will not be covered.
Policy lapse – Be it a term plan, endowment plan, ULIP or any other type of life insurance, once the policy lapses, it will cease to provide cover. Therefore if you raise a claim on a lapsed policy, it will not be registered or honoured.
Withholding information about existing insurance policies – Often, policyholders fail to reveal information about their existing/old policies at the time of applying for a new policy. This is enough reason for the insurer to reject your claim when the time comes.
Reasons Why Motor Insurance Claims Get Rejected
Your motor insurance claim can get rejected for a number of reasons connected to your vehicle, driving style, purpose for which vehicle is being used, and a number of other reasons.
Vehicle in unfit to be driven – You have been involved in an accident and raised a claim with your insurer. However, your insurer discovers that the tyres of your vehicle were worn out, or your tail-lights weren’t working at the time of the accident, thereby making the vehicle unfit to be driven. This is sufficient reason for your claim to get rejected.
Flouting the ‘limitation of use’ clause - Motor insurance policies are provided for personal and commercial use vehicles. Therefore, if you have taken an insurance policy for your personal vehicle, your policy will not cover any loss that is caused to the vehicle while it is being driven for commercial purposes.
Drunk or careless driving – If the vehicle has been involved in an accident while being driven by someone under the influence of intoxicants, or found being driven recklessly, the insurer is sure to reject the claim arising due to such an accident.
Driver without a license – If the vehicle, while being driven by someone without a valid driving licence, gets into an accident, the insurer will reject the car or bike insurance claim arising henceforth.
Unpaid premiums – If you have raised a claim on your auto insurance policy but have some unpaid premiums pending payment, the insurer can reject your claim.
Reasons why health insurance claims get rejected
Conditions for pre-existing illnesses – Health insurance plans will normally not cover pre-existing diseases from the commencement of the policy. There is usually a waiting period of 4 years, or less, after which the insurer will cover pre-existing diseases. Therefore, any claims related to a declared pre-existing condition, are not likely to be taken up by the insurer.
Permanent policy exclusions – The working of a medical insurance policy can be a bit more complicated in their working, especially considering the exclusions. Ensure you know which diseases, treatments, expenses are covered under the policy, what is the waiting period for coverage, and which diseases are specifically not covered at all.
Caps/limits on treatments – Health insurance policies often come with caps on treatment costs and room rent. This means that the insurer will only be liable to cover treatment costs up to a certain amount, while the rest has to be borne by the policyholder.
Claim form filled incorrectly – During a medical emergency, it is natural for one to be mentally stressed. However, it is important to exercise caution when filling up your claim form, as any incorrect detail regarding the policy, or treatment can cause the insurer to reject your claim outright.
Break in policy renewal – If you have forgotten to renew your health insurance policy, but unfortunately have to raise a claim following a medical emergency, the insurer will not entertain your claim. Furthermore, failure to renew the policy on time can also lead to the loss of no claim bonus.
The real purpose of having an insurance policy is to protect yourself or your family members from the financial loss that follows an unfortunate event. If purchased and maintained with due diligence, an insurance policy is nothing short of a blessing, especially during difficult times.
(This content has not been created by the editorial team.)
First Published: Feb 28, 2018 13:29:34