Term insurance is one of the essential expenses you should make to safeguard your family’s finances in case of your death. Moreover, people need to understand different aspects of term insurance, which causes incomplete information, ultimately defeating the purpose of term insurance and putting your family at risk of poor financial conditions after you!
Thus, in this article, we’ll look at common queries related to term insurance, which often lead to rejection or even a claim’s repudiation.
The least-understood term in the insurance industry is the Claim Settlement Ratio, which is often considered the only factor while buying term insurance policies, which SHOULD NOT BE DONE. Claims settled are only a number but do not indicate the reason for rejection or how frequently the company rejects claims of the policyholder’s family. Even if the company agreed to pay the claim done by the insurer’s family, the percentage of the claim amount actually paid remains a mystery.
Thus, judging a term insurance policy from the claim settlement ratio is wrong. Here is what you should do to avoid any hassle in claiming the cover amount. You wish that your family does not get into any mishaps. However, the Assets Under Management (AUM) of the company contributes to determining the company through which policy should be opted. Companies with larger Assets Under Management are expected to process claims more smoothly than companies with less AUM value.
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Few Reasons for death that are not included in Term Insurance Plans
Paying attention to the mentioned reasons for death under which the claim will not be paid is essential. As initially mentioned, the company will not pay any claims in which the insured person died because of the following reasons as mentioned below:
- Intoxication from any substance
- Homicide or Murders
- Hazardous Activities or Adventure Sports such as Scuba Diving or Sky Diving. In a gist, a term insurance policy does not cover enjoyment :-).
- Suicide in the first twelve months.
- Pre-existing Diseases are not disclosed when buying the policy.
- Childbirth or Pregnancy.
- Terrorist Attack or related Activity
- Undisclosed Habits, including alcoholism or tobacco usage regularly.
- Driving under the influence of Drugs or Alcohol
Thus, taking care of the exclusions mentioned above is essential. These conditions may vary from company to company, but the ones mentioned above are common to most. Also, maintain your health records through regular full-body checkups and keep track of all doctor visits.
Maintaining a health record every six months to a year will prove your honesty in disclosing diseases and pre-existing conditions to the company. It will reduce the chances of claim repudiation to a considerable extent.
How will my family claim the cover amount?
Claim processes for different companies can vary per the company’s standard of operations, but most reputed companies have a similar claim process. Through the steps mentioned below, your family can easily file a claim for the cover amount such that the company starts investigating your claim and processes it without issues.
However, saving the policy document in different forms, such as hard and soft copies, is essential. Your family should be well aware of the location of the policy document as it contains the policy number and other relevant details, such as the contact number for reporting claims. After this, you should make your family aware of the following procedure.
To add to our discussion on term insurance, let’s talk about a special plan called Saral Jeevan Bima Yojana. This blog explains that this plan is for people who usually can’t get term insurance because of their job, income, or education. It’s a simple plan that any Indian citizen can get, starting with coverage from Rs 5 lakh to Rs 25 lakh. This plan makes sure everyone has the chance to protect their family, even if they earn less or have a risky job. It’s a good option for those who find it hard to get insurance otherwise.
What all documents are to be submitted by the family members?
- Death Certificate of the policyholder.
- Cancelled Cheque or Bank Passbook of the Nominee along with NEFT Mandate.
- Photo ID Proof of the Nominee of the policyholder.
- Medical Proof of Death or Cause of Death
- Statement of the Attending Physician in case of death in hospital.
- All the Medical Reports to the present date of the policyholder.
- FIR, Post Mortem Report or Final Police Investigation Repost or Charge Sheet if available.
All these documents are essential, along with timely intimation of the policyholder’s death to the insurance company, ensuring a hassle-free claim of the amount.
Also, as per Section 45 of the Insurance Act, no term insurance company can reject the claim after three years from the date of buying the policy; however, the exclusions mentioned earlier are still not covered within the policy and will not be entertained by the company.
Reasons for Claim Rejection: What to take care of?
The company issuing insurance can deny your claim in two ways: rejection and repudiation; however, these two have huge differences!
Rejection of Claim
When the company declines to entertain the request, it is called claim rejection. This is not the final “NO” by the insurance company; however, it implies the lack of proper documents or a similar reason, which, when appropriately submitted or when the cause is rectified, causes the claim to proceed for investigation and is further concluded.
Repudiation of Claim
When the company accepts the claim request after the family of the policyholder submits all documents and then begins an investigation but concludes that the case is not payable, the company marks the case as repudiated. This is the final “NO” by the issuing company.
Main Reasons for Claim Rejections
- Not Disclosing Information or providing limited information about the policyholder. At the time of investigation, the company is not liable to pay the claim amount if any such health-related information is concluded.
- Policy Lapse, in case you do not pay the premium amount, also gives the company the right to reject your claim immediately.
- Not updating nominee details also leads to claim rejection, as the nominee details are equally important.
- Undisclosed Medical Conditions or habits such as smoking or alcoholism.
- If the cause of death is under the conditions mentioned exclusions above.
- Disclosing other policies bought should be disclosed on time to verify the claim amount.
Finally, the delay in informing the death of policyholder to the company also plays a significant role. Thus, if the above points are addressed, you can avoid claim rejection for familiar reasons. Thus, your family can claim the cover amount by following the instructions listed in the policy document and attaching all the documents above.
Conclusion: All Information at a Glance
In conclusion, term insurance is a necessary step towards safeguarding your family against unplanned events such as death, permanent disabilities or any fatal diseases. The premium amount you pay is the ultimate solution to secure your family’s finances after you. You can choose a coverage amount of up to twenty times your annual income through term insurance.
However, there are some exclusions in the cause of death through which the insurance company can reject your claim, which mainly include adventure sports, suicide, homicide or intoxication through alcohol, tobacco or drugs, as discussed above. Your family should be well aware of the location of the policy document, either in hard copy as received from the company or in the form of scanned soft copy in the form of a saved document on Google Drive; you can also use an E-Insurance Account to save policies, learn how to open one here; this promotes the chances of the claim as your family can inform the insurance company as quick as possible.
Following the process mentioned by the particular company and submitting all the above documents ensures a smooth investigation. Your family can claim the cover amount effortlessly after three years of buying the term insurance policy, all thanks to Section 45 of the Insurance Act, under which only the reasons mentioned under exclusions as discussed above can be rejected claim, and no other claim reason shall be dismissed.
Also, it is essential to note that the period of three years is calculated as per the date of buying or modifying the term insurance policy. The nominee should be updated in the term insurance policy, and changes in minor details such as place of residence should be emailed to the company.
You can watch this YouTube video on the same where Money Minded Mandeep explains the complications in term insurance and their solutions on Labour Law Advisor’s Youtube Channel:
Thus proving your authenticity as a genuine policyholder! Thus, in a genuine case, the company can only reject the claim at first due to a lack of documents, but as the records are fully submitted, and the reasons for rejections are taken care of, the company investigates the case, and the claim amount is deposited to the nominee’s bank account.
In simple words, term insurance is a simple life insurance that pays out a big amount to your family if you pass away during the policy’s term. It’s affordable and doesn’t give money back if you outlive the policy, making it cheaper than other life insurance. How to Select the Best Term Insurance Plan – this blog suggests looking at things like how often the company pays out claims (Claim Settlement Ratio) and making sure you’re honest when you apply, so your family doesn’t face issues later. This advice is great for anyone thinking about how to protect their family’s future without spending too much.
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