Common Reasons Term Insurance Claims Get

While leading life insurers maintain Claim Settlement Ratios above 98%, claim repudiations still occur. Understanding why insurers reject claims helps policyholders protect their families from unexpected disputes.

1. Non-Disclosure of Pre-Existing Medical Conditions

Hiding chronic illnesses (diabetes, hypertension, heart conditions), prior surgeries, or hereditary ailments is the most frequent ground for claim rejection. Insurers investigate medical history through hospital databases and pharmacy records upon receiving an early claim.

2. Incorrect Lifestyle and Tobacco Disclosures

Failing to disclose smoking, vaping, chewing tobacco, or regular alcohol consumption voids the contract if medical investigations reveal nicotine or related organ damage at the time of claim.

3. Policy In a Lapsed State

If premiums were unpaid past the statutory 30-day grace period, the policy is legally inactive. No death benefit is disbursed for deaths occurring while a policy is lapsed.

4. Specific Policy Exclusions

• Suicide Clause: Under IRDAI guidelines, if death occurs due to suicide within 12 months from policy inception or revival, the insurer pays only 80% of total premiums received rather than the sum assured.
• Criminal Acts: Deaths resulting from active participation in illegal or criminal activities are excluded.
• Hazardous Sports without Rider: Fatalities from undeclared adventure sports (skydiving, racing) may be contested unless covered by specific riders.

Understanding Section 45 of the Insurance Act

Section 45 provides strong consumer protection: an insurer cannot call into question or repudiate any life insurance policy after three consecutive years from policy issuance or revival on grounds of misstatement, unless fraudulent intent is proven in court.