11 reasons Term-life insurance claim can be rejected
What to do if the claim rejection appears unreasonable
Buying a term-insurance doesn’t ensure the it will cover death of policy holder under any or all circumstances. There are death claims which gets rejected because of exclusions in term-life insurance plans and also non-disclosure. Insurance is contract between two parties, the policy holder and the insurer, when you buy a policy online or through agent, you must read the form carefully, do not hide any fact about yourself what you ought to tell the insurance company, i.e. the questions mentioned in the insurance application. Also, keep a copy of of your filled up form, take a print out and keep it in a folder/ safe ocker for future reference.
Initially it me seem tempting to avoid habits like smoking/ drinking, hobbies like bungee jumping, horse riding etc, but you should know in advance for such activities Life Insurer may add extra premium. The focus here should be to ensure to respond to each query truthfully. Following are the nine common reasons why claims get rejected. But everything cannot be decided in black and white, and there are times when conflict may arise between the nominee and insurance company and nominee may feel the insurance is rejected on false grounds, will cover that too in the post.
11 reasons Term-life insurance claim can be rejected –
Suicide or death due to self-inflicted injury – If the policy holder commits within one year of purchaisng the policy, nominee won’t get death benefit. However, the nominee will get the benefit second year onwards.
Death involving homicide: If death of the policy holder is suspected to be murder and the nominee(s) are suspect of the crime, the claim-compensation to that nominee(s) will stand rejected, until her/his innocence is established in a court of law
Death due to sexually transmitted diseases like HIV or AIDS – Death claim arising out of STDs will be rejected as per common exclusions, no insurance company will honour such claims
Death due to the pre-existing health conditions (condition present prior buying the insurance) – If policy holder happens to have pre-existing health condition such as diabetes, hypertension or any disease, such claims which may arise from death due to complication on such condition will be declined. As, many health condition appears little later part of our life, it is prudent to apply for term-life insurance policy as soon as getting a job, atleast by 30 years of age.
Death caused due to the involvement in illegal or criminal activities – If a policy holder dies while engaging in any illegal or unlawful activities such as drug peddling, smuggling, unauthorised arm dealing any activity which is considered illegal as per Indian Law, the insurance will be rejected
Accidental death due to driving under the influence of alcohol or drugs – If the policyholder dies due to accident caused by driving under the influence of Alcohol
Death due to the participation in racing activities – Death caused by sports or adventorous activities like bike racing, car racing, traking, bunjee jumping, horse racing, any adventorus activities which has inherent life risk, claim arising from such activities are out of the scope of policy claim. Claim arising from fatal accident such as these will be outright rejected.
Death due to pregnancy and childbirth – If the death of the policyholder takes place due to pregnancy complications or childbirth, the insurer would not pay the sum assured to the nominee.
Pre-existing disease / Condition – Death due to any condition that existed while availing the term insurance policy will not be settled by the insurer
Death due to natural disaster/ war/ nuclear calamity – It is a common exclsion in life insurance, in situations like war and nuclear calamity, insurance company protects itself from mass claim which may arise in such situations.
Non-disclosure – Non-disclosure such as smoking habits, recent surgery, any medical procedure, family history or any point in the query list of the policy application form will be counted as breach of the insurance contract conditions, and on discovery of such facts, Insurance companies will reject the claim
What to do if you feel the claim rejection was unjustified?
The above are the direct rejection reasons, but if nominee is not satisfied with the reason of rejection, delay in claim settlement the nominee can escalate the matter. Ideally, insurance claims needs to be settled within 30 days of claim application. If the claims are not settled on time and the nominee is not satisfied with the response from the insurance company, nominee can take following action. The nominee needs to file a complaint first with the insurance company through the consumer grievances section online or reach out grievances cell officer with written complaint and required supporting documents at the earliest, they should respond to your complaint within 15 days of complaint submission.
If Insurance company fails to resolve your query or sort the claim settlement issue, you can complaint to IRDAI (Insurance Regulator and Development Authority of India)approved Insurance Omudsman in a written format. Insurance Ombudsman scheme was created by government of India for individual policyholders to have their complaints settled out of the courts system in a cost-effective, efficient and impartial way.
There are at present 17 Insurance Ombudsman in different locations in India. Ombudsman has authority to intervene in the claims below Rs. 30 lakhs. Incase of claims above 30 lakhs, one needs to approach the consumer court for sorting the matter with legal help. In consumer court, Court’s directive will be final for the insurance company. Insurance company cannot escalate the matter to any other court. If the nominee wins the case, the court can direct the insurance company to pay penalty and interest charges on the claim amount in favour of the complaint.
So, Read the policy application carefully, make comparison with few products, also check claim settlement ratio before making a decision. Even after buying a insurance policy, Policy holder gets a free-look period of 15 days, within which policyholder should go through the policy document, incase of dissatisfaction, policy holder can cancel the polcy and get back the premium paid (company may deduct medical expenses – if incurred).
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Why to buy Life Insurance? Life insurance is the best way to protect your family financially. In plain language, it protect the family members financially incase of death of the polcy holder. There are other benefits available apart from death benefit. I have come across calls from many insurance agents who try to sell other life insurance products like endowment plans and ULIPs trying to push as term plan. In this post, we will talk about why term plan/ protection plan/ peru life insurance makes sense for a bread winner.
Term Insurance product has caught fancy of savvy Investors only recently , little more than a decade and constantly gaining popularity in Urban India especially. Let us look at what is a pure term insurance and how it works in our scheme of financial planning.
Read – How life insurance claims gets rejected? What to do if claim is rejection is wrong?
“Insurance” is a contract to protect against risk. Investment components are added to the product to make it more attractive. I must add, that a chunk of lump-sum money payout together at a deferred term incase of ULIP and Endowment insurance plans makes the products (savings/Investment + Insurance) a very attractive offer. But this one is unable to over any family adequately.
For all Life Insurance insurance plans, IRDAI (Insurance regulator and Development Authority of India) has mandated a maximum premium to be capped at 10% of the sum assured (or Sum Assured to be 10 times) to be annual policy premium to become eligible for tax deduction benefit under income tax section 80C for and total maximum investments capped at Rs. 1,50,000 as on FY 2020-2021 .
Let us consider we have 3 insurance policy options – a) Option offering 10 times Sum Assured and Option B) 20 Times of Sum Assured and a 3) A Term policy. For illustration we are chosing a 30 year old male non-smoking with 1 crore sum assured for 3 years. I will not mention any insurance company here, as I am doing this illustration for education purpose and understanding only. I am also not including the saving or investing benefits offered by option A and Option B (Cause they do have assurance of retun on maturity, Option C is only death benefit, No Maturity value).
I am taking HDFC Life insurance Term insurance premium for illustration purpose.
Life Insurance coverage
10 times of yearly premiumPlan A
20 times of yearly premiumPlan B
Term Insurance (Pure protection plan) [HDFC Life]Plan C [approx]
25 Lakh
2.5 lakh
1.25 lakh
Rs. 3,600/- (approximate)
50 Lakhs
5 lakh
2.5 lakh
Rs. 6,000/- (approximate)
75 Lakhs
7.5 lakh
3.75 lakhs
Rs. 8,000/-(approximate)
1 Crore
10 lakhs
5 lakhs
Rs. 10,000/*- (approximate)
So we can see, the premium for adequate life coverage can be bought at a very affordable rate in Term insurance plan, while the other plans offer same insurance cover at 40 to 80 times of the term plan.
However, Plan A and Plan B has additional investment component – Noteworthy, your investment cannot be partially withdrawn, making it an illiquid investment option through out the policy term. If you have job change, take sabbatical or some minor setback, Plan A and Plan B will become a burden and on non-payment Insurance benefit will be compromised.
What we can Expect from a pure-term Insurance plan? It is a low cost high coverage insurance plan. It is designed for financially protect the family of the policy holder in-case of untimely death. This insurance is only for the bread-winner of the family whoseuntimely demise can shake the financial foundation of the loved ones. , it should be taken by anyone who has responsibilities like elderly dependant parents, dependant wife and children, home loan, car loan etc. One should consider higher insurance cover incase of medical conditions of self or family members, impending college education cost for children or absence of retirement kitty.
As Life insurance acts as protection against untimely death, it is said that one should take atleast 10 times of one’s annual salary, to adequately protect the loved ones to protect against inflation, child education, non-earning spouse, dependent elderly etc.
Term plan doesn’t guarantee a return on your premium. There is no financial product which is risk free. But I have learnt with experience, that biggest ‘risk’ in finanacial product is not knowing the product and category well. So check the exclusions each insurance company has mentioned in their websites and learn and choose the insurer after reading and taking proper feedbacks.
Important factors to choose term insurance policy –
How many dependents you have – If you have elderly parents dependent on your income or you are married and your spouse is a home maker (and) or school going Children
Family financial Goals – If you have not yet saved enough for adequate critical milestones like children higher education, have outstanding big loans (home loan/ vehicle loan)
What is the adequate life cover you need– Do some calculation on this. Apart from 10 times of yearly salary rule, do you have any high liability like children high education/ outstanding Home loan etc
Compare a few options based on coverage amount, claim-ratio, policy exclusions and rejection ratio
Term plan is not a substitute for investment. It offers a support system. In ideal situation, term-insurance premium we should consider as a yearly premium to Insurance company for protecting future of your loved ones in your absense, while buying this insurance, we really hope and pray that we should never require to file this claim settlement form ever. As this insurance cover offers a lumpum benefit to the immediate family members in case of death, this works like a parachute or a cushion from a hard-landing.
Investment and Insurance are both essential and important part of our financial plan. But, both has different purpose in the plan. Even if you choose to buy ULIP or Endowment, you should do some research and learn about all the insurance option before opting for an insurance plan
Old age deserves some peace of mind and happiness. But millions of people under poverty line, that is still distant dream in India. To fight the perils of poverty and old age, PM Narendra Modi introduced multiple social security scheme in year 2015. And Atal Pension Yojana is one of them.
What is Atal Pension Yojana? This is a pension yojana now you can suggest your maid, cook, Kirana wala, Plumber and contract labours and everyone who doesnt have one and doesn’t pay income tax yet..
In 2015, Indian Government introduced important financial inclusion and social security programs for the financially non-protected citizens especially. To enseure financial security to especially for those working in informal sector or self-employed Indian citizens, The Government launched Life Insurance, Personal Accident Insurance and Pension Scheme – a simple savings scheme.
Atal Pension Yojana is a scheme aimed at protecting the financial future of the low-income self employed people and people with unorganized sectors, like shop-keepers, contract labours etc.
This scheme is open to citizens of India who doesn’t pay income tax yet and not empanelled under EPF and other schemes (chart mentioned below), one can subscribe to it between 18-40 years, the contribution can be made till 60 years of age. Under this scheme, a subscriber will receive a minimum guaranteed pension of Rs 1,000 to Rs 5,000 per month after attaining the age of 60 years, depending upon his contributions. According to a recent announcement in July 2020, Finance Ministry is considering a proposal to relaxing the maximum monthly pension to Rs 10,000 from Rs. 5000 currently and raise the maximum age limit for entry age in the Atal Pension Yojana scheme to 50 years.
Finance ministry is also considering the proposal to enable the Atal Pension Yojana (APY) subscribers to increase/decrease their pension plans as per their changed income levels and capacity to pay APY contributions, which will be very uselful foo continue the subscriber contributions in the scheme till 60 years.”
How can One apply for Atal Pension Yojana (Online too)?
This scheme is currently being distributed through 258 active APY Service Providers consisting of Banks and post-offices as this scheme is only available to those who have a Savings Bank account. Having a Aadhaar card will be very useful in this.
Who can Apply?
Any Indian Citizen Between Age 18 – 40 can enter the scheme and continue the contribution till 60 years. Who is not empanelled with any other government pension / EPF scheme.
What is the minimum contribution requirement for APY? And how frequently one has to pay?
The contribution will depend on the entry age and target pension, . One can choose monthly, quarterly or half-yearly payment. The contribution can be made by auto-debit facility.
Atal Pension Yojana Chart
There is a small-payment on non-payment on non-contribution. Banks are required to collect Rs. 1 per month for contribution of every Rs. 100, or part thereof, for each delayed monthly contributions. On non-payment, one has to make the contribution next month.
It is mandatory to provide nominee details in APY account. If the subscriber is married, the spouse will be the default nominee. Unmarried subscribers can nominate any other person as nominee & they have to provide spouse details after marriage.
How to Check the Status of your contribution in Atal Pension Yojana? Find Atal pension yojana statement here – Keep Your PRAN No. handy. https://www.npscra.nsdl.co.in/scheme-details.php Then click on APY e-PRAN/Transaction Statement View You will be directed to your contribution page.
How does Pension distribution happen? Subscribers would receive the guaranteed minimum monthly pension of Rs. 1000 or Rs. 2000 or Rs. 3000 or Rs. 4000 or Rs. 5000 at the age of 60 years. The monthly pension would be transferred to the subscriber’s account, and after him to his spouse and after their death, the pension corpus, as accumulated at age 60 of the subscriber, would be returned to the nominee of the subscriber.
In case of premature death of subscriber (death before 60 years of age), spouse of the subscriber can continue contribution to APY account of the subscriber, for the remaining vesting period, till the original subscriber would have attained the age of 60 years.
Other pension plans are there like NPS, lic pension plan, Annuity plan etc you can check online for them.
Who cannot apply for Atal Pension Yojana? Indian Citizens who are already part of a social security system such as mentioned below cannot apply for it.
Employees’ Provident Fund and Miscellaneous Provision Act, 1952 The Coal Mines Provident Fund and Miscellaneous Provision Act, 1948 Assam Tea Plantation Provident Fund and Miscellaneous Provision, 1955 Seamens’ Provident Fund Act, 1966 Jammu Kashmir Employees’ Provident Fund and Miscellaneous Provision Act, 1961. Or any other statutory social security scheme
Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana aims to cover the lower section of our society, let us spread the word about the benefits to the people who may need it.
Banks – State Bank of India, Canara Bank, Punjab National Bank, Federal Bank, UCO Bank and many more You can open Atal Pension Yojana account at India Post office branches too. The forms are available in Hindi, Bangla, Gujarati, Marathi, Tamil,Telegu, Oriya etc.
Many a times lack of awareness is what makes us feel helpless. During this lock-down phase, I have spoken to many women who work as house-helps, other jobs earning small sum, many of them didnot have Jan-dhan account, the ladies who had Jan-dhan account, most of them, depending on the eligibility, got the money deposited in their account as promised by government. We may not have ultra-social security facilities, but we do have many benefits which a lot of people are not aware of. Let us take the responsibility and share the information on Jan Dhan account, Life Insurance – Pradhan Mantri Jeevan Jyoti Bima Yojana, Personal accident insurance (Pradhan Mantri Suraksha Bima Yojana) and Atal Pension Yojana.https://www.youtube.com/embed/XE2iFvR5rQc?start=43&feature=oembed
Pradhan Mantri Suraksha Bima Yojana
Pradhan Mantri Suraksha Bima Yojana offers Accident cover for only Rs. 12 per year. Let us look at Eligibility, Cover and benefits. It is a government-backed accident insurance scheme.
It is an personal accident insurance, introduced by PM Narendra Modi in the year 2015, to include all Indian Citizen under this social security cover. This is helpful for people especially who don’t have life insurance or health insurance cover to financially protect the policy holder incase of permanent partial or total disability incase of an accident.
Tip – To keep your PMSBY and PMJJBY insurance working, ensure to keep Rs. 340 in your Bank Account in Month of May, so that there is no default, otherwise insurance will expire and you will happy to apply fresh.
What are the features of PMSBY?
PMSBY gives the policy holder to insure oneself against unfortunate events that can lead to death or disability.
The premium payment process relies on the auto-debit facility. The policyholder must approve of this while enrolling for the scheme.
When will the policy be terminated?
The policy will be terminated in the cases if the registered bank account is closed, the account balance is insufficient in the time of the yearly premium payment or the policyholder reaches the age of 70.
Eligibility Criteria for Pradhan Mantri Suraksha Bima Yojana
The minimum entry age for this scheme is 18 years
Age limit for availing this insurance benefit is 70 years
Applicant’s saving bank account should be integrated with the person’s Aadhaar card
PMSBY application form is available in several regional languages apart from English and Hindi. For example, the form is available in Hindi, Gujarati, Marathi, Tamil, Telegu, Oriya