Life Insurance Claims and Denials: Legal Remedies for Policyholders

Life insurance is an effective long-term investment that provides financial protection for your loved ones. In case of your sudden demise, your family members or nominees can file a claim to receive the sum assured from the insurance company. However, you must understand that life insurance claims can be rejected for many reasons. Knowing and preventing these common issues ensures a smoother claim process.

In this article, we will discuss the common reasons for the rejection of life insurance claims and how you can avoid them.

Top 5 Reasons of Life Insurance Claims Denials

Some of the most typical reasons for life insurance claim rejections include:

1. False or Incorrect Information

You must provide the insurance company with the right information when buying a life insurance policy. Claims may be denied for nondisclosure of even seemingly insignificant information. For example, failing to disclose your smoking habits to the insurance company can lead to claim denials. Such a situation can devastate those whom you left behind.

2. Payment of Premiums

To keep your life insurance coverage valid, you must pay your payments on time. Your policy may expire if you fail to pay the premium on time, in which case the insurance provider may reject any claims related to the lapsed policy. Nonetheless, the majority of insurance providers include a 30-day payment grace period (though this period can also vary between 15 and 60 days based on policy terms). It's important to remember that if a policy lapses or terminates, any premiums you've already paid cannot be refunded.

3. Type of Death

Insurance companies have a standard exclusion list of deaths to reduce losses. They do not offer coverage for all types of death. The insurance company can reject your family's claim if you have been engaged in hazardous activities or have died of a pre-existing disease.

In addition, insurers carefully examine the cause of death and do not offer financial assistance if your death is caused by natural calamities, homicides or terrorist attacks.

4. Delay in Filing a Claim

Generally speaking, insurance companies give you a fair amount of time to submit a claim. Insurance firms have been directed by the Insurance Regulatory and Development Authority of India (IRDAI) not to reject claims on the basis of insufficient time. On the other hand, the insurance company may deny the claim if your family chooses not to make one. However, in order for your heirs to get insurance benefits, it is crucial that they file the claim as soon as possible following your passing.

5. Nominee Details

The insurance company can reject a claim if you have not updated or filled in the nominee details. As it is common for people to buy life insurance when they are young and name their parents as nominees, they may fail to update the nominee details. Hence, it is important to keep nominee details updated to avoid such a situation.

How to Deal with Denied Life Insurance Claims?

If the insurance company has denied the life insurance claim, your family member can follow these tips:

1. Review the Denial Letter: Examine the denial letter given by the insurance company, as it will outline the reasons for the denial and cite specific policy provisions as references.

2. Contact the Customer Care of the Insurance Company: Write a letter to the company if you feel the reason for the denial is invalid, with a well-reasoned counterargument. Supporting evidence can be an effective way to appeal the decision.

3. Contact the IRDAI: If you are unsatisfied with the company's response, you can register a complaint with the IRDAI.

Final Words

Overall, it can be a difficult and unpleasant experience to have an insurance claim denied. However, it's crucial to understand that in India, there are legal avenues available to you. Understanding the reasons behind the denial and taking the necessary steps increase the chances of a claim being approved.