For many years, Aditi saw her husband, Gautam, regularly pay a sizable sum of money as insurance premium for a life insurance policy to ensure his family’s financial security in case of his untimely death. Aditi’s worst fears came true when Gautam did not return home one night from an office party. While driving back, Gautam had met with an accident leading to his death.

Aditi was yet to come out of her grief when she was dealt with another major shock, this time by the insurance company when she lodged her claim for Rs. 1 crore sum insured under the term policy. The insurer rejected her claim as the police report of the accident said that on the fateful night Gautam was driving ‘under the influence of alcohol’, an important exclusion in the policy.

Aditi’s is not an isolated case. Insurers often deny death benefits to nominees for various reasons. In most cases, however, Indian insurance companies pay the claims. In fact, Indian life insurance companies have a healthy claims settlement ratio (number of claims settled per 100 received), with many showing a ratio in the high 90s.

However, policyholders should be aware of the many common reasons that could lead to a rejection of claim, leading to harassment and financial distress to the nominee or beneficiary when they are not around.

Here are some of the reasons:

Lapsation of policy: You must pay your policy premiums on time. Not doing so may lead to your policy lapsing. No claims will be paid against a lapsed policy.

Non-disclosure of facts: You must be honest while disclosing facts when you purchase a policy. Hiding important facts, such as pre-existing diseases like heart ailment, diabetes or cancer, or ‘material misrepresentation’ of things such as age or smoking habits can lead to claims denial.

Exclusions in play: Claims can be rejected since cause of death wasn’t covered in the policy. Thus, death while driving under the influence of alcohol or drugs, death due to the participation in high-risk events (such as car or bike racing), death due to the pre-existing health condition or death due to participation in illegal activities. Death due to suicide is excluded under both individual and group insurance policies. However, in some cases, the insurance company will pay all the premiums paid by the policyholder until the date of death after deducting policy-related expenses.

Inadequate documentation: Death benefits can be rejected if policyholder’s family or nominee is unable to provide necessary documentation to support the claim. This could be missing death certificate or original policy documents, ID proof of the beneficiary, discharge form (executed and witnessed), medical certificate (as proof of cause of death), police FIR and post-mortem report (in case of unnatural death), hospital records/certificate (if death is due to illness) or cremation certificate.

Death during contestability period: Insurance policies often include a ‘contestability period’ stipulating if policyholder dies within two years of purchasing the policy, the insurer can contest or question the claim. During this period, the company can cancel the coverage and return the premium if they believe the policyholder has withheld crucial information or has deliberately lied. So, when you purchase a policy, check whether death during this period will be an issue.

Failure to update nominee details: You should keep your insurer updated on nominee details such like name, age, address and relationship with policyholder and any change should be communicated immediately. If nominee dies during the policy term, change in nominee should be updated immediately. There are no restrictions on the number of times nominee details can be changed.

No beneficiary mentioned: Choosing the beneficiary for your life insurance money is a key step in purchasing a policy. Though nominee and beneficiary can be the same person, the former’s duty is to apportion the money received to the beneficiaries mentioned. It may be apportioned as per Will of the person. Your primary beneficiary is first in line to receive the death benefits. If the primary beneficiary dies before you, a secondary or contingent beneficiary is next in line. Some people also designate a final beneficiary in the event the primary and secondary beneficiaries die before they do.

Steps to take if claim is rejected

If you are among the few beneficiaries whose life insurance claim is rejected, you would be wondering what to do now. The money that could have set your life back on track is now slipping out of hand! Here is what you should do now:

Approach the insurer: You should understand the exact reasons for rejection and if necessary lodge a complaint with it.

Escalate, if not satisfied: If response from the company is not satisfactory or no response is received within the set deadline decided by the insurer, you should escalate complaint to the company’s grievance redressal head.

Knock at IRDAI doors: If your concerns are not addressed with 15 days, approach the Grievance Redressal Cell of the Consumer Affairs Department of Insurance Regulatory and Development Authority of India (IRDAI) at complaints@irda.gov.in. You can also use of IRDAI’s online portal – Integrated Grievance Management System (IGMS) at igms.irda.gov.in to register and monitor your complaint.

Seek Ombudsman intervention: The Insurance Ombudsman is tasked with redressing grievances. In case a customer is not satisfied with the decision/resolution of the company, he or she may approach the Ombudsman if claim has been rejected or there is dispute or delay in claim settlement.

Take legal recourse: If none of the other remedies work, the complainant can approach the relevant Consumer Court under the Consumer Protection Act, 1986. In such a scenario, the consumer can plead in person before the court instead of seeking the services of an advocate.