Calamities such as earthquakes, floods, and wars always remind us of the fragility of human life and the importance of safeguarding ourselves against financial uncertainties. An insurance policy is a shield to protect and save us from the wrath of disasters like these. But what happens when a life insurance claim gets rejected during unforeseen calamities? Leaving the family helpless with no ray of hope, the whole purpose of having a life insurance policy gets defeated.
It is, therefore, critical to prevent your claim from getting rejected so that financial protection for your loved ones in need of the hour is delivered.
Get involved in filling your life insurance policy proposal form at inception
As one decides to opt for a policy, the first essential step towards it is filing their form. The problem arises when consumers allow their agents to fill out their forms and, while doing so, do not even take the effort to review the final document before it reaches the life insurance company. While dependency on the agent is common, one must make sure to personally get involved in the form-filling process because if the wrong information goes into the proposal form, which may result in the rejection of the claim, the very purpose of buying life insurance to protect the loved ones may be defeated.
Avoid concealment of information
Life insurance policies get issued basis the details you provide while filling out the proposal form, and policyholders sometimes fail to provide key information when applying for a fresh policy. The three most important things a customer must declare correctly are his financial condition – source of income, his habits/ health condition and any existing life insurance policies to enable the life insurer to decide on issuance of the policy basis these inputs. If the life insurer finds that you simply haven’t provided complete information or withheld any information, it may repudiate your claim on the grounds of nondisclosure of material facts.
A few years back, we remember a prominent case from the industry where an adventure junkie took out a large term cover to protect his family in case of an eventuality. He disclosed his hobbies clearly while taking the policy where he was loaded with extra premium due to the added risk to his life. Unfortunately, after a few years, he met with a fatal accident while doing a para-jump. His wife, who was the nominated person, got the entire claim money within a month of filing the claim papers.
Be mindful of detailing pre-existing ailments
Pre-existing ailments are defined as any ailments that the customer had either as symptoms or was diagnosed and received medical treatment throughout the 48 months before the first policy issued by an insurance company. Any kind of pre-existing diseases or any other conditions must be declared upfront and not withheld. If found later, it may restrict you from getting the claim proceeds. You should ensure you do not conceal any information because it may provide reasons for life insurers to repudiate your claims.
Update nominee details correctly
While incorrect nominee details will not result in the repudiation of the claim, there is a possibility that it may result in a prolonged legal battle between the nominee and heir in case of an acrimonious relationship between them. You may change your life insurance nominees depending upon your changing life stage. For instance, in your singlehood, you would have named your parents as nominees, but after marriage, chances are you may want to make your spouse or children the nominees. It is, therefore, necessary to update the information regarding the nominee from time to time.
Make sure your policy doesn’t lapse
The policy may lapse if the premiums are not paid on due dates. Life insurers also provide a grace period for policyholders who fail to pay the premiums by the due date. The life insurer may not consider any claim payout under the policy if the customer fails to pay the due premiums within the grace period. Hence, it is essential to adhere to the premium payment schedule to avoid repudiation of claims on this ground. Life insurance is not just a tax-saving tool; it’s a serious financial product that, if used correctly, can be a saving grace for your family and dependents. To ensure a smooth claims process, while most companies provide the help of claims officers who are well-trained, it is equally important to inform your loved ones about the life insurance policies you have bought, the contact details of the agent advisor and life insurer and the documents which will be needed to file the claim.
Incidentally, the late 80’s saw some insurance majors in the West (including Lloyd’s of London) develop an Alien Abduction Term Insurance plan. The terms were very simple – you need to pay all your premiums in time, you cannot suppress any material information that proves no previous engagement with any outer space species, and your registered nominees will need to confirm your abduction by ‘real aliens’. Lloyd’s sold upward of 30,000 such policies, some of which are still being serviced!
