A term insurance policy promises peace of mind. But for some families, that promise collapses when a claim is denied. In India, where insurance awareness is still growing, many rejections stem from avoidable mistakes, poor paperwork, or lack of updates. Others arise from clauses that families never fully understood.
The good news: most claim rejections are preventable. Let’s break down the common reasons, real-world cases, and how you can safeguard your family’s payout.
TL;DR
- Common causes: non-disclosure, policy lapses, waiting/suicide clauses, nominee errors, fraud suspicion, paperwork gaps.
- IRDAI requires insurers to settle valid claims in 30 days; after 3 years, policies can’t be challenged except for fraud.
- Courts have reversed wrongful denials, reinforcing that families have legal protection.
- Transparency, timely premiums, and updated records are the keys to smooth claims.
Why Claims Get Rejected (with Examples)
1. Non-Disclosure of Health, Habits, or Policies
Insurance rests on utmost good faith. Hiding illnesses, smoking, or prior policies can void a claim.
Case: In Udupi, a father’s claim was denied after LIC alleged his daughter concealed her health condition. The consumer forum found no evidence of suppression and ordered a ₹21 lakh payout.
2. Policy Lapse Due to Non-Payment
A lapsed policy is no policy at all. If premiums aren’t paid within the grace period, cover ceases.
Example: ICICI Prudential disclosed that lapsed policies are among the most frequent reasons for rejection—often due to failed auto-debits or outdated bank mandates.
3. Waiting Periods and Suicide Clauses
Most policies exclude non-accidental deaths in the first 90 days and suicides in the first year. Families sometimes only discover this after a tragedy.
Lesson: Always check what’s covered in the early months of a policy.
4. Nominee Errors or Outdated Details
If nominees aren’t recorded or updated, claims stall. Legal heirs may need succession certificates, causing long delays.
Example: A Mumbai widow waited six months for her husband’s claim because nominee details weren’t updated post-marriage.
5. Fraud and Suspicious Circumstances
Insurers investigate aggressively when claims look unusual—for example, a new policy followed by an early death.
Case: In Bikaner, a man staged his death to claim ₹50 lakh. Police exposed the forged documents and arrested him.
But fraud doesn’t only mean fake deaths. Even fabricated hospital records or forged certificates submitted unknowingly by families can lead to denials.
6. Missing or Faulty Documentation
Even genuine claims stall if paperwork is missing.
Case: A ₹50,000 health claim was denied over a clerical hospital error. The policy was cancelled, only to be reinstated after IRDAI intervention.
7. Exclusions You May Not Notice
Policies may exclude deaths in war zones, high-risk travel, or overseas incidents without prior disclosure. Families are often unaware until claims are denied.
Real-World Case Highlights
| Case | Issue | Outcome |
| Udupi LIC claim | Alleged non-disclosure | Court ordered ₹21 lakh payout |
| Mumbai widow case | Outdated nominee details | Six-month delay |
| Bikaner staged death | Fraudulent claim with forged docs | Rejected, criminal charges filed |
| Health claim case | Clerical hospital record error | Reinstated after appeal |
How to Protect Your Claim
1. Be Transparent at Purchase
When applying for term insurance, it’s tempting to skip over details—like a smoking habit, family history of illness, or an old medical test report. But every omission becomes a potential weapon against your family later. Insurers assess risk based on what you disclose. If the facts don’t match, they can legally repudiate a claim. Being upfront might mean a slightly higher premium today, but it buys certainty tomorrow.
2. Pay Premiums on Time
The simplest reason for rejections is also the most common: lapsed policies. A single missed payment beyond the grace period cancels cover completely. And unlike a phone recharge, you can’t just “restart” coverage without scrutiny. Revival often requires medical tests, penalties, and higher premiums. The fix is simple: automate payments. Link your policy to your primary bank account, and set backup reminders in your calendar. Think of premiums as a fixed monthly bill, not an optional expense.
3. Understand Waiting and Exclusion Clauses
Most families don’t realize that early deaths—within 90 days of policy start—aren’t always covered unless accidental. Similarly, suicide in the first year is excluded. Beyond that, many policies also carry geographical or occupational exclusions: war zones, hazardous jobs, or deaths outside India without prior disclosure. Before buying, scan the “exclusions” section. Knowing these rules upfront avoids shock later.
4. Keep Nominee Details Updated
A policy without a valid nominee is like writing a cheque without a name. The insurer can’t pay directly and will instead ask for a succession certificate—often dragging claims for months. Life doesn’t stay constant: marriage, divorce, children, or even the passing of an earlier nominee can all change who should receive the money. Make it a practice to review nominee details every two to three years, or immediately after any major life event.
5. Organize Documentation Properly
Even valid claims can stall if supporting documents are missing or contradictory. Insurers need a clear paper trail: the policy document, death certificate, hospital records, and identity proofs. Store both digital copies (in a secure family cloud folder) and physical copies (in a labelled file at home). More importantly, tell your nominee where to find them. Many rejections arise not because families don’t deserve the payout, but because they can’t provide the right papers in time.
6. Know Your Rights Under Section 45
The Insurance Act gives policyholders a powerful protection: once a policy has been active for three years, insurers cannot reject claims for misstatements or non-disclosure—unless they can prove outright fraud. Many families don’t know this, and quietly accept rejections even when the law is on their side. If your claim is denied after three years of policy, demand a written explanation and cite Section 45.
7. Escalate if Rejected
A rejection isn’t the end of the road. Every insurer has a grievance redressal team you can approach first. If that fails, the Insurance Ombudsman offers a free, faster resolution mechanism. And if the dispute persists, consumer courts have often ruled in favor of families. Persistence matters: real cases show that even clerical errors have been overturned when challenged properly.
FAQs
What is the most common cause of claim rejection?
Non-disclosure of health or lifestyle information, especially smoking or chronic conditions.
How long does an insurer have to settle a claim?
30 days for complete claims, extendable to 90 if investigation is required.
Can a claim be rejected after 3 years of policy?
Only if fraud is proven. Section 45 protects policyholders after 3 years.
What if documents are missing?
Insurers may reject initially, but families can appeal and provide alternate proofs.
Conclusion
Most claim rejections aren’t about fine print—they’re about avoidable mistakes. Missing nominee updates, skipped premiums, incomplete paperwork, or misstatements are all preventable. By being transparent, timely, and organized, you can ensure your policy fulfils its only purpose: protecting your family when it matters most.
