“We were told by the insurance company that we will get X amount of money if something unfortunate happens to my relative who bought this insurance policy and paid premiums regularly. But now when we filed for the claim, the insurance company has refused to pay us…” This is a standard statement you would hear from people whose claims have been rejected by the insurance companies.
For the incident mentioned above, when the concerned insurance company investigated the claim, it found that pertinent facts were deliberately suppressed by the policyholder at the time of buying the policy. So the claim was rejected on the ground of non-disclosure of material facts.
Insurance companies do not reject claims without a valid reason. There is always a compelling reason for turning down a claim as it is their duty to ensure that the burden of fraudulent or unjustified claims is not borne by other policyholders who are honest and transparent.
Insurance claims are rejected for a number of factors. The most common reason for rejection of a claim is material non-disclosure of facts pertaining to an individual’s health. Insurance companies define the risk of covering an individual on the basis of his/her age, health, medical history, family, income, occupation and existing insurance cover.
A life insurance contract is a contract of ‘utmost good faith’, wherein it is the duty of an individual to inform the insurer of any facts that have the capacity to increase the risk for the insurer. One must confirm that all details required on the proposal form are completed correctly and there is no misrepresentation. In case there is a doubt over whether a fact has to be declared, it is advisable to declare the same on the form. It may be relevant for the purpose of the cover sought for. This is important as the claims will be payable only when the applicant/proposer upkeeps utmost good faith while purchasing life insurance.
Insurance companies need to know everything about the policyholder that materially affects their decision to accept risk. There should not be any surprises later on. To ensure a trouble-free claim process it is essential that the customers provide correct and honest declaration of details. Unfortunately, some insurance buyers believe that by keeping the health problem under wraps, one can buy life insurance at a lower cost.
While for all large insurance covers complete medical check-up is a must, insurance companies rely on the declaration by the policyholder when the insurance cover is not very large and the buyer is young. In such case, you should not hide any information relating to your health and family medical history. Also, do not hide facts like consumption of tobacco or alcohol. One must not underestimate the ability of the insurers to unearth correct information about the policyholder as they go through a rigorous process. Even in cases where complete medical check-ups are done by the insurance companies, you should disclose every medical and health related history as well as family history with honesty.
Besides the health condition, you should also be completely honest about your age, occupation, income and other insurance cover. Your age defines the risk, so misrepresentation of age could lead to rejection. Do not overstate your income, since your income would be used as a criterion by the insurer to assess the amount of insurance cover required by you. If your profession involves risk mention it in the application form, as there could be certain hazardous avocations for which insurer may require additional information before accepting the risk or there may be certain events for which the cover may not be applicable.
Often, the insurance agent, who helps customer filling up the application form, is blamed for misrepresentation of fact in the form. However, it is the policyholder who knows about his/her situation the best and if he/she doesn’t reveal any information, it will be impossible for an agent to get hold of the facts. So, please do not rely on the agent to fill up your application form. Ask him if you get stuck, but do it yourself. Check all the details on the proposal form thoroughly before you affix your signature on the form.
Also, tell the insurance company about any insurance cover that you have. This is important to remove any doubts about a moral hazard. The insurance company requires you to submit copies of your PAN card, photo identity proof, birth certificate and other such documents at the time of buying a policy. Don’t submit documents that have incorrect information, such as wrong address, differently spelt name or different birth date. These can prove to be hurdles at the time of making a claim. Also, do ensure that you appoint a nominee for your policy. In the unfortunate event of a claim, it’s the nominee to whom the claim amount would be paid to.
After receiving the policy document check it carefully and inform your insurer if you find any inaccuracy even if it attracts another round medical check-up or additional premium. Finally, do not forget to pay the premium of by the due date so that your policy does not lapse.
In the event of the claim, the nominee/claimant would required be to provide the mandatory documents and any other documents required to the insurer at the time of filing the claim. Follow these steps to ensure a smooth claim settlement process.
The author is the senior vice president & head–operations & systems at Tata AIA Life Insurance Company.
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