why would term insurance payout be rejected ?

POSTED BY anand ON November 26, 2010 10:47 pm COMMENTS (4)

I have taken the iterm policy (online) for 1 cr and also planning to take another one from iprotect (online) for 1 cr. Together these premiums are lower for me than if I were to take a 1 cr offline policy from, say, lic.

i’m a bit confused after reading comments on settlement ratios from members. isn’t a term insurance plan a very simple product – in that the sum assured is paid out in case of death ? of course, premium should’ve been paid in time, and correct information provided when taking the policy (for instance, smoker or not).

so why would the company renege on settlement ? looking for real world examples from the members on thier experiences or anecdotes (verified !) please…

4 replies on this article “why would term insurance payout be rejected ?”

  1. JayaprakashReddy says:

    Well said Shashank and very good question by Anand.

    Till now I’ve been reading so many articles which debate on private and public insurance sectors but nobody has any data on why private insurance companies have been rejecting claims, if they have valid reason then yes we can say not to go for private insurance companies.

    Even I tried to find the reasons behind rejection of claims but in vain I couldn’t find any reason anywhere on the net. If you are correct in all the details provided by you then as Shashank said its not our job to think about which is best, let IRDA do all the job and I feel they are doing it well.

    I’ll definitely try to find some info regarding this claim rejection and post it here if I find any.

  2. shashank kashettiwar says:

    Anand,
    Why have you written, ‘why would term insurance payout be rejected ?’ I mean why have you focussed on term insurance specifically. You mean to say that a savings plan’s( ULIP or Endowment) claim won’t be rejected but because term plan’s premiums are less so the insurer would be inclined to reject the claim?
    I’m considering your question as a more general rejection concern than ‘term insurance’ focussed.
    I’m sharing my thoughts. We have a world class regulator, IRDA to look after the interests of the insured person. We are a civil society where law of the land prevails. So many mechanisms to sort out grievances or injustice if any are put in place. The ombudsman institution, consumer courts and civil courts are there to resolve any injustices, to provide justice to; if there is any breach of contract from the side of the insurer against the, insured person.
    Were not there court cases against LIC or PSU general insurace companies when they were monopolies some 10 years back? All these institutions even today are facing thousands of cases.
    For the government are the citizens who are insuring with private players ‘step’ citizens and persons going with PSUs the ‘real’ citizens and neglect the interests of these ‘step’ citizens by giving a free hand to the private insurers and letting them get away with rejection of a valid claim. Are the goverment companies totally error free and the private players are negligent about or having criminal intentions of rejecting claims? It is definitely not so!
    Those people who think they are safe with LIC only because it’s a government owned institution, don’t want to trust other mechanisms, Regulators who have been placed there by the same government?
    OK you love LIC but does LIC love you? IF they were loving me so much then they won’t make me pay unnecessary extra premiums for the same promises.
    Getting heavy covers from any insurer requires strict medicals.Don’t even think it is easy to get big covers from anyone. I see so many premium loadings, postponements and rejections of the proposal even. If the insurance companies were so unscrupolous a lot, then it wouldn’t have been the case, isn’t it? And the Regulator is not a mere spectator to let anyone get away with it.
    Looking for the claims ratio statistics and making decisions based on such statistics is a exercise which is really not required. Also any conclusions and decisions based on it may not come true in practice. Let’s not do the regulators job. They are doing it quite well, thankfully.

    shashank

  3. Gaurav says:

    I have a policy from icici and there was medical examination conduced by them also. The big reason that I have heard for rejection is when factual information is not provided (like smoking, drinking habits etc).

  4. anithaveeravendhan says:

    Recently My husband took a term policy for 30 lakhs from lic. Premium is Rs.10000 per year. Definitely it is very high compared to others. But Only lic insists on medical test for term plans if the amount is on the higher side. Policy gets okayed only after the results are reviewed. If there are some medical problems the premium will be higher.
    But if anything happens, the claim settlement will not be rejected because they already know the medical condition of the person insured. Hassles will be very less compared to other providers. If lic settles the claim, other providers will not have any reason to reject the claim. So take a term plan from lic atleast for a minimum amount. It will definitely diversify the risk(the line we all like).

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