The notion of life insurance is typically to make sure that your family is taken care of in the event of your death, but what if once you’ve passed on your family’s claim is rejected? JustMoney takes a look at why your insurance company could deny your life insurance claim.
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According to 1Life insurance, the below are possible reasons for rejection:
1. You withhold information from a provider: Typically the most common reason behind an insurer refusing to pay out is because of non-disclosure of relevant information.
“Here are two examples of what would be considered non-disclosure (or fraud):
- You develop cancer before taking out a policy and don’t tell the insurer.
- You say on your application form you don’t have a heart condition when in fact you have a strong suspicion that you do, but have not yet had medical confirmation.
In these instances, the life claim can be rejected or the pay-out reduced,” states 1Life.
2. Your payments are not up to date: Because a policy is a legal contract where you pay a monthly premium in return for cover, it needs to be upheld from both sides. “Stop (or forget) to pay, and that contract no longer exists, because you have not kept your side of the bargain,” adds 1Life.
One of two situations typically occur:
- You fail to pay the regular premium for one or two months, in which case your cover is suspended or,
- You fail to pay for several months, in which case the contract could be terminated, in which case there is no possibility of claiming.
3. You failed to update your provider on certain life changes: “Many people think once they’ve bought life insurance they won’t have to think about it again. However, you need to update your policy if you adopt riskier behaviour, as this will affect your cover - either in terms of the premium you should be paying, or because insurers will not cover some behaviours, for example taking drugs, dangerous sports, etc.,” 1Life explains.
4. Certain policies only cover accidental death: It is important to note that accidental death cover is a separate product, but is complimentary to the life insurance product. Despite the high rates of non-communicable diseases, people still fear accidental death more. As a result, according to 1Life, they tend to only cover themselves for this.
“This can be a shock to the policyholder’s family if he/she dies of natural causes. Certain policies might also impose a waiting period on terminal illness claims, i.e. they will not be covered for a certain period of time after policy inception. A terminal illness is considered to mean a rapidly progressing sickness where your life expectancy is deemed to be no more than one year and that has no available cure,” 1Life highlights.
Another important point to make is that suicide is typically not covered by life insurance policies for the first two years, and thus these policies will not pay out if the person commits suicide within that exclusion period.
“It is very important to read through your policy carefully and take note of all the do’s and don’ts. Policies will often have various exclusions coupled to them, such as travel exclusions or medical exclusions,” states Will Keevy from Insurance Busters.
These exclusions are usually stipulated at the inception of the policy contract and seeks to inform the policyholder about what the policy will not cover.
Another common exclusion is the “high risk job exclusion” notes Keevy. “Here your policy can refuse to pay out if you are killed on the job. These high risk jobs usually include things like being a rigger for example.”
The deputy Ombudsman for Long term insurance Jennifer Preiss added: “Claimants should also make sure that they claim as soon as possible after a claim arises as policies often carry a time limit in which the claim has to be submitted to be considered. If submitted late the claim may be declined by the insurer. This is particularly so with group scheme policies and funeral policies.”