Term insurance is a very handy form of life insurance that many people benefit from. While all the aspects associated with term insurance are easy and smooth to deal with, at times, the claim process can be tricky. It is not uncommon to find insurance providers delaying the term insurance claim and raising disputes about it as well. There are some logical reasons why this happens. But, there are also some very shocking reasons for the same. Read on to know more.
1. Incorrect declaration on the application form -
The biggest reason why term insurance claims get delayed or even rejected, is because the policyholder makes incorrect declarations when buying the plan. This is why you need to be completely honest. If you are a smoker, admit it. If you have pre-existing health conditions, state it in the form. A small error from you at this stage can cost your family dearly later on.
2. Misplacement of policy documents -
The nominee raising a term insurance claim needs to produce the original policy documents when filing for a claim. If the nominee is unable to find these documents, the claim will be delayed. Always tell your loved ones where you kept the policy documents so that the claim can be filed and received smoothly and quickly.
3. Incorrect documentation -
Apart from the policy documents, you also need other important documents such as the KYC papers, death certificate, etc. If there is any error in submitting the correct documents then the term insurance claim can be disputed and thereby, get delayed. Inform and educate your family members about the documentation process so that there are no delays due to this.
4. Delay in claim submission -
Ideally, a claim should be raised within 24 hours of the policyholder’s death. If there is a delay in the claim submission, the insurance company may delay the payout, which in turn can be very detrimental for the policyholder’s family at a challenging time.
5. Foul play in death -
If the insurer gets a whiff of foul play in the death of the policyholder, the term insurance claim may be held back. Unfortunately, we all have heard about murders, suicide, etc just for the purpose of getting a term insurance claim. If the insurance company feels there is any foul play involved, they will run a complete investigation and that will obviously delay the claim payout.
6. Incompetence of agent -
After the death of the policyholder, the nominees at times do not understand what needs to be done and how. With no option left, they turn to the insurance agents for help. But some insurance agents are incompetent and submit the term insurance claim in an improper manner. This causes disputes and delays in the claim payout.
7. Premium not paid on time -
Another major reason for the delay in claim payout can be an unpaid premium by the policyholder. If the premium is not paid on time, the policy can lapse. And then, the nominee cannot raise a claim on the lapsed policy. This is why you need to pay all the term insurance premiums on time to ensure there is no dispute or delay when your family files a claim after your demise.
8. Interest generation by the insurer -
is an unethical practice that some insurance providers undertake. By holding back the claim amount, they essentially generate more interest income for themselves. Even if they pay the claim amount after a month., they earn a hefty interest on that sum for an entire month. This is a common practice that is both unethical and illegal.
9. Tactic for lower settlement -
Another unethical practice widely practised by the insurance providers is raising disputes to force the nominees to settle for a lower claim amount. The insurance company deliberately delays the claim process and raises unjustified disputes. This drags and stretches and finally, a settlement is offered to the family of the deceased policyholder. This settlement is nothing but a lower claim amount, which the family accepts.
10. Financial inability of insurance providers -
And last but not least, at times, the insurance company is unable to pay the term insurance claim amount on time because the financial health of the company is weak. This rarely happens in India because the IRDA strictly regulates the activities of all the life insurance companies and steps in when there is any such situation to deal with.
These are some of the reasons why term insurance claims are delayed and disputed.
In a nutshell
As you can clearly see from the points mentioned above, some of the reasons for delays in term insurance claims are valid. This is why you should be honest and also pay your premiums on time. Remember, a term insurance claim is received by your family after your death. You won't be around at the time to help them with anything. So be meticulous from your side to ensure they receive the claim smoothly. Also remember to choose the best life insurance company to buy the policy from, as they would be less likely to pursue unethical means than the ones stated above.
