5 times insurance companies can reject your claim

Read the fine print and avoid potential losses, says Naval Goel

Illustration: Dominic Xavier/Rediff.com

An insurance contract may seem like a fool proof protection against the insured event. One might think that if they pay the premium of the policy on time then, there is an assured protection of repayment of the bulk sum of money at the time of contingency. However, it is mandatory that the policy holder should read into the fine print. This will save the person from feeling cheated and minimise losses.

For the fine print includes various exclusions from a life insurance policy. Exclusions can be defined as events and conditions which are not included in a certain life insurance policy. These exigencies in case of a life insurance contract include:

The suicide clause

An individual may decide to purchase a life insurance policy and then, suddenly choose to end her/his life by committing suicide. As per the policy, the nominee should be paid the assured amount in the event of the policyholder’s death.

However, in case of a suicide, there is no such insurance. Hence, the provision prevents individuals from using the policy as a façade to safeguard their interests in the event of death through committing suicide.

In the first step, the nominee that is the beneficiary is required to produce a death certificate by a certified medical examiner. The said certificate shall be submitted with the insurance company to make a claim.

After the insurance company has carried out an investigation with regards to the reasons behind the death of the policy holder, it may or may not adhere to the claim depending on the results.

The ultimate decision, however, rests with the court. If decided that the cause of death was suicide, the insurance company is not be liable to pay.

There are, however, a few debatable areas under the same clause.

For example, drug overdose. What happens if someone dies of drug overdose? Is the person entitled to the claim?

The rule is that when the policyholder dies of an unintentional drug overdose, there will be compensation. The decision of whether the overdose was intentional or otherwise lies with the courts.

Dangerous activities

Like they say, activities which play with danger take you nowhere. When death occurs in unnatural circumstances, any insurance company will investigate relentlessly before satisfying the claim.

The insurance company always conducts an investigation before deciding whether to satisfy the claim or not. These dangerous activities include:

• Consumption of alcohol or drugs
• In the event of war
• When taking part in a racing activity or a hazardous activity
• When taking part in an act which is criminal in nature
• In case of pregnancy or childbirth or complications which arise from it
• In case of death owing to a pre-existing illness

Aviation exclusion

A fine print in the policy will attest to the facts that all plane crashes are not covered under the same. In case someone dies in a commercial plane crash or because of any other aviation technical failure, then the passenger is well covered under the life insurance policy, s/he has been paying premium for.

In the case of private plane crash, however, the insurance company is not bound to pay the assured sum.

Lifestyle diseases

Lifestyle diseases are considered similar to dangerous activities. If someone dies because of his addiction to smoking, it is considered to be a lifestyle disease. And the insurance company is not liable to pay for the same.

For example, smokers are more prone to succumb to lifestyle diseases and are categorised in a higher risk pool.

War exclusion

Also, any person who dies as a victim of war or fighting in war is not covered under life insurance policies.

Thus, we see how important it is that any prospective policy holder should read the contents of the contract properly. An overview is never enough in order to assure one’s nominee of a financially safe future. The fine prints always include exceptions, which may not suit one’s situation.

For example, terrorist attacks are also not covered generally in life insurance contracts. Hence, when one chooses a life insurance policy, it is a wise and rational thing to go through policies before making a decision.

Naval Goel is CEO and Founder, PolicyX.com