Nothing is as painful as the death of a loved one. An insurance company can add to the trauma by rejecting the life insurance claim filed by the nominee. However, companies don't reject insurance claims without a reason. There's usually a valid justification for turning down a claim, even though such an action could damage their image.

Typically, insurance claims are rejected because of suppression of information that defines the risk involved in insuring the individual. This could be health-related facts, family history or even the income level of the individual. Advisers and agents, who are the interface between the company and the policyholder, play a vital role here. Most of the time, they are the ones filling up the proposal forms with information provided by the buyer.

Some agents and advisers fill in incorrect information-either by mistake or deliberately. In many cases, the buyer is unaware of his own condition and, therefore, is not able to provide the information. It is also possible that some agents advise buyers not to disclose crucial facts, such as too many deaths in the family at early ages or somebody undergoing treatment for a disease. They do so in the guise of helping the buyer, but in reality they are not acting in the true interest of their client.

It is advisable to fill up the proposal form yourself, or at least go through it carefully after it has been filled up. Don't forget to do this again when the policy document and photocopies of the proposal form are sent to you after the policy has been issued. If there is a discrepancy, you have 15 days (free-look period) to return the policy. Even buyers tend to be tightfisted when it comes to revealing information. One of my clients refused to furnish his income details and, therefore, could not buy a life insurance policy.

An insurance company wants to know the buyer's income to determine whether his life is actually worth the cover he is seeking. After seven years of convincing, my client eventually reconciled to the idea and provided his proof of income. Insurers too are no sacred cows and often infringe the rules they have themselves put in place. Towards the fag end of the financial year, when taxpayers are scrambling to buy insurance policies and the insurance companies need to notch up sales targets, some of the proposals are underwritten without adequate scrutiny.

The field force is encouraged to somehow grab as much business as possible. The policies that are issued in haste have a high probability of repudiation in case of a claim being raised. Most rejected claims are of policyholders who died within two years of buying the cover. Such claims are usually investigated thoroughly by the insurance company.

Never underestimate the efficiency of the insurer to dig out a reason to reject the claim. They are well-equipped to unearth anything that could have gone wrong at the proposal stage, and can put forth all possible reasons to disallow the claim if they find a flaw. Only in cases of accidental deaths, whether early or late, do they accept the claim without any hassle and give the sum insured.

According to Section 45 of the Insurance Act, 1938, policies cannot be called in question on the ground of mis-statement after two years. But don't bank on this as anything can happen in two years. Besides, this rule is not applicable if there is a break in the policy within two years of death and the plan is revived. Every time a policy is revived, the policyholder has to give a fresh health declaration and go through a medical examination, if applicable. The two-year period commences from the date of the revival of the policy.

Source : ET