Jagoinvestor

April 16, 2012

Not disclosing your old Insurance policy can lead to Claim Rejection

Everyone makes mistakes and are not aware about it ! . A lot of people who buy more than one insurance policies, do not declare about their existing policies to the new company. Some do this because they are not aware about this “compulsory” rule, but some do it intentionally! & there are some who do not pay much attention to it thinking that they will be able to “escape” it and fool the company. However, you should know that companies are very careful about the rules and regulations as mentioned in the policy and declaring your old Insurance policies is a mandatory and important rule. No matter how much your policy sum assured is for, even if its 1 lac, you have to declare it when you take a new life insurance policy (This means term plan, ULIPs with insurance cover, Traditional Policies) . For an example see how Debajyoti was confused on this non-declaration of old policies question and I told him how it was a very important thing to do.

Declare old Life insurance policies while taking a new policy

Today, I am going to discuss a recent case I saw in Crime Petrol (a tv show showing real life cases, must watch) and it is an eye-opener for those how have not declared their existing insurance policies while taking a new life insurance policy. Because in this real life case, a guy family was rejected 1.25 crores of life insurance claim just because the guy did a small mistake, he never disclosed his old policies. Read on –

Real Life Story of Sandip from Gujarat

Sandip was in a lot of debt. His business was not doing well and he was very much worried about his family and what will happen to them. The only solution he could think of is Life Insurance money which they would get after his death, but his life insurance was very very small (few lacs). So he took around 1.25 crores worth of life insurance, thinking that after his death, their family would get all the money.

But there was an issue, a big-big issue. He could not commit suicide, as it was not covered for the first year and his life was becoming really hell and he didn’t want to live anymore. So the only solution was that he should be killed in an accident or some one murders him. He asked his friend to kill him in a way that no one comes to know about it and it looks like murder. This way, he would die and his family will get the life insurance money and his family would live happily.

His friend was scared to death to kill him and really was not able to do it as he was a good friend of Sandip, but finally he killed him on his request. Police came, verification was done and finally Police was able to crack the case and catch his friend. The family figured out about the insurance policy when Sandip’s wife saw the documents in an almirah . The family went to insurance company and asked for claim amount, but the insurance company pointed out the violation of terms and conditions and said that the claim will NOT be paid as there was violation of rules. Family freaked out and gave all sorts of reasons why they should get a claim , but rules and rules. The family filed a case against the insurance company in court, but that was of no use as the court also gave judgement in favour of insurance company.

The family never got any money.
Here is the youtube episode of the Crime Petrol Story I was talking about for those who want to watch it

Have you declared your old policies to new insurance company?

You have probably done the same mistake. If you were holding any endowment/moneyback policy, ULIP, Term Plan or any kind of Life Insurance and then you took a new policy and didn’t declare all the old policies, then after your death, your family is not going to get any money! Please take it seriously.

So your action item is to check with your insurance company customer care about the declaration of old policies and incase you have not given that information at the time of taking the policy, better give them this information, because I don’t think you should be doing that big charity!

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Mathew
Mathew
7 years ago

I have taken a term policy from Max Life recently for Rs.1 Crore.
My diabetic history was disclosed in the proposal. Though the
medical reports were normal, life insurance company charged me
50% extra premium based on my health declaration.

I have 2 personal accident policies and 2 mediclaim policies in my
name which I mentioned on my proposal form. How ever, I forgot
to give the details of 2 term polices which were lapsed in 2013.

Actually, those term polices were taken in 2011 but I discontinued
them due to the over charging of premium (on my health ground).
And I don’t have those policy details also. So I could not give the
details of those policies on proposal form.

Also I didn’t mentioned in the proposal form that I had been charged
with extra premium by other insurance companies earlier. However,
details of all current (existing) policies were given on the proposal.

In your expertise, should I ignore my new term policy and go for a
new term insurance plan to avoid any complications due to
concealment of fact and insurability.? Will my nominee face any
problem in case of a claim, since I didn’t mentioned the details of
expired policies.?

Will this issue be treated as a very serious offense even after paying
the premium for 3 years.?

Biren
Biren
7 years ago

Hi Manish,

1. What are the reasons companies ask these data of previous policies?
2. What is the main reason companies reveal behind rejecting the claim on the ground of non-disclosure of previous policies?
3. By rule I take 3rd policy I declare about precious 2 policies. Whether I have to inform first 2 also about my 3rd policy?

Thanks.

subhash
subhash
7 years ago

dear sir,
while applying for new life insurance plan,insurance company is asking about existing health insurance details also,
in life insurance application, why health ins details ?

and should we mention group health insurace from employer(every month some amount is debiting from my salary)

& should we mention contract closed general insurance polices like health,,,,PA,,,,,Critical care insurance,,,bike/car insurance ,,,,,from my own pocket paying (due to one year agreement completed and didn’t do any renewal),

&

if we dont mention health ins details (inforce&lapsed) in life insurance application ,will insurance company will reject the claim,
please confirm

subhash
subhash
Reply to  Jagoinvestor
7 years ago

hello good evening,
i have seen following sentence in one of leading insurance company application,,,,,,

“” Details of life insurance / medicliam / health / personal accident policies of the life assured held / applied with
**** company / other companies “”

My concern is now i am going to take term plan , please clarify we have to declare this all things,,,,,,,or only life insurance details required

subhash
subhash
7 years ago

dear sir,
while applying for new life insurance plan,
1) should we mention contract closed life insurance polices (due to lapsed , contract closed by insurance company)

2) lapsed life insurance policy details

Pawan
Pawan
7 years ago

Hi Manish,

The post is really helpful. I have one doubt, Is it compulsory to provide the details of insurance provided by my employer also while filling the term plan application?

Thank you

Pawan
Pawan
Reply to  Jagoinvestor
7 years ago

Thank you Sir

Daljit
Daljit
8 years ago

Hi,
I have not declared my previous policy details while applying for PM Jeevan Jyoti Beema Yojna because there was no such information sought in the application form. What will be its impact at the time of claim settlement.

Sorabh
Sorabh
8 years ago

Hi Manish,

Query regarding Health Insurance. My mother had a claim previously rejected on account of non-disclosure of preexisting ailments. She got influenced by agent to not mention any during the proposal and to refuse the existence of any such ailment when and if actually detected. That, obviously, backfired big time. We have since let that policy lapse instead of continuing it.

Now, if I were to apply for a new policy on her behalf, disclose all necessary facts including the aforementioned rejection, then how likely is the new insurer to reject the proposal? I was going through the proposal form for a new prospective insurer and noticed a section to that asks to mention any previous claim rejections/approvals apart from preexisting ailments.

Thanks.

Sorabh
Sorabh
Reply to  Jagoinvestor
8 years ago

Thanks Manish.

What would you suggest in such a situation? Come clean or keep the old rejection scenario under wraps and risk discovery?

The reason I ask while I’m fine disclosing preexisting ailments, a complete exclusion would prove be a big detriment.

Sorabh
Sorabh
Reply to  Sorabh
8 years ago

No game here. I want something that works when things go south. The last claim rejection had me crippled financially. If anything, I understand the value of insurance better than ever.

The mentality was psychological erstwhile. The lackadaisical approach cost me dearly. I wouldn’t want a repeat of the same incident.

There’s already an insurance in place for my mother that’s provided by employer, no questions asked. I wanted to keep another just in case. I hadn’t opted for the group policy earlier when the old one got rejected. I guess you can gauge how laid back I was about having a health insurance back then.

I’m all for coming clear this time around. Just wanted an opinion that’s all. I’ll follow up on that link soon.

Thanks for the advice. 🙂

Harish
Harish
8 years ago

Hi, Do I need to disclose Mortgage based life insurance as well while taking a term plan?

Anand
Anand
8 years ago

I took term plan from tata aia (SA 50 lakh).I have disclosed previous policies but forgot to disclose pradhan mantri jeevan beema yojna(SA 2 lakh) & hdfc cancer care plan(SA10 lakh) premium rs. 2382. Is it necessary to disclose these policies.
please help .

anand
anand
8 years ago

I took term plan from tataaia (SA 50 lakh).I have disclosed previous policies but forgot to disclose pradhan mantri jeevan beema yojna(2 lakh) & hdfc cancer care (10 lakh premium( rs. 2382). Is it necessary to disclose these policies.
please help .

Madan
Madan
8 years ago

Hi Manish,

I am taking eTerm insurance from LIC. I have declared my Bajaj Allianz life insurance with them. I am wondering if I need to declare my Pension Plan (from ICICI prulife) also with them? The Pension plan has a sum assured of 2.5 Lakhs. Do you think I missed declaring it? If so, how is possible to get it added to the policy? I am yet to receive my policy document from LIC.

Regards,
Madan

Susheel singh
Susheel singh
8 years ago

Hi mohit :: i have old policies but not paying thier premium since 2 years and thease are lapsed … So should i disclose them in new policy or not required

SS
SS
8 years ago

Manish, I am part of group insurance policy bought by my employer for all the employees. Do I need to declare that as well?

SS
SS
Reply to  Jagoinvestor
8 years ago

Thanks! And, what about PMJJBY?

SS
SS
Reply to  Jagoinvestor
8 years ago
SS
SS
Reply to  Jagoinvestor
8 years ago

Thanks!

hardik
hardik
8 years ago

Dear sir, i am planning to buy hdfc term plan for 15 years. now my real problem is that i dont have details of my older
policy details as all were done by my father. i do not have any details regarding my life insurance policies. what can i do?
what should be the solution for this?

Akhil
Akhil
Reply to  Jagoinvestor
8 years ago

Hi,
I bought two term policies at the same time for 50Lacs each. I did not have any other policy before it. So i have not disclosed anything. Should i update this information now with both the insurers?
Thanks, Akhil

Rohit
Rohit
8 years ago

Hello Manish,

As per the latest amendment to Insurance Act, an insurer cannot deny claim after 3 years of policy commencement.
Does it mean any policy older than 3 years can never be rejected for a claim? That is a big relief for genuine customers but is that really going to work?

Rajiv
Rajiv
8 years ago

Hi Manish,
I took a term policy from icici and there are few other policies from hdfc and lic taken 5-6yrs ago.
At that time I never used to smoke or drink.
But now I do.
Do I need any voluntary disclosure?
What hapens if someone,at time of taking policy doesnt smoke but after few yrs he starts?
And suppose now if I take a fresh policy and disclose abt.My smoking, then wouldn’t it conflict with the previous data?
Pls help.

MANISHVASHISTA
MANISHVASHISTA
8 years ago

I tried to buy online icicipru term plan earlier than i filled details of old policy column,but now they had removed that column from application form & also they are not providing sufficient space to answer all questions in health details & been advised to send a separate mail with details of answers & old policy history … on confirming they told me that this mail won;t be a part of policy document received post approval.. so please suggest me should i buy their policy or not & it’s urgent as i want to buy policy before my DOB 31/7/1979.. please do reply.. or may reply on [email protected] .
THANKS

Dinesh
Dinesh
8 years ago

Hi Manish,

I have applied for a term insurance policy, my father died at the age of 58 due to natural causes, however almost 7 year ago (age 51) he had a stroke. But since the declaration paper says whether any relative had died due to stroke within 60 years, I have not mentioned his name there. Can there be any problem during settlement of the term loan for this? Further, during submission of documents I have submitted all the policy details (no term insurance taken till date.) However, most of these policies are to be valid till 2030, I wonder if based on this declaration my term insurance amount is reduced then after 2030 my overall SA amount would be less. Also, should one declare PMJJBY and PMSBY in these declarations? Thanks, – Dinesh

shravan
shravan
8 years ago

Thanks Manish!

Shravan
Shravan
8 years ago

Hi Manish,

This is Shravan regular reader of your blob..I have couple of questions on term insurance.

Request you to please clarify the same.

1 question : I took one ICICI online term policy of 40 lakh and successfully paying premiums from past 3 years.

I also took LIC ( offline) term policy of 40 lakh with 20,000= premium annually 2 years ago and paying premiums on time.

My income at the Time of LIC office line policy was 6 lakh +, however currently my income has reduced from 6 lkah to 3.18 lakh.

Will there be any impact of issue with regards to the income being decreased. do i have to update the insurance company about the income details to avoid any claims rejection in future if any.

Now I am planning to apply of LIC online term policy, once i get the policy would like to drop the LIC offline policy, however due to less in come I am not able to apply the same.

is there any criteria to follow with regards to sum assured amount..

Please advice.

Thanks,
Shravan