Term insurance gives financial protection to a family after the policyholder’s death. But what happens if the claim is denied? Many families go through emotional and financial stress when an insurance company refuses to pay. In most cases, the rejection happens due to mistakes made while buying the policy or not following the policy rules properly.
Here are the five most common reasons why term insurance claims are denied and what can be done to avoid them.
One of the biggest reasons for claim rejection is when the policyholder does not give full and correct medical information while buying the policy. For example, if the person had diabetes, high blood pressure, a heart condition, or underwent surgery in the past and failed to mention it, the insurer might refuse to pay the claim later.
Insurance companies need this medical history to decide the risk before giving the policy. If someone hides such details, the company can cancel the policy even after the person has passed away.
There is also something called the “contestability period,” usually lasting for two years from the policy start date. If the person dies during this time and any hidden fact comes to light, the claim can be denied even faster. It is very important to share all details truthfully, even if they seem small or unimportant.
A term insurance policy only stays active as long as premiums are paid regularly. If even one premium is missed and the grace period ends, the policy can lapse. This means the insurance coverage stops, and the insurer is no longer responsible to pay.
If death happens after the policy has lapsed, the family cannot make a successful claim. While some companies offer reminders or allow revival of the policy, it is risky to rely on those options. It is best to set up automatic payments or regular reminders to make sure premiums are paid on time.
A nominee is the person who receives the money from the insurance company after the policyholder’s death. If the nominee’s name is not mentioned properly or not updated after life changes—like marriage, divorce, or childbirth—it can lead to confusion and delay in claim settlement.
In many cases, if the nominee is not mentioned at all, the insurance company asks for legal paperwork, which takes time and causes emotional stress. Families may even end up in disputes over who gets the claim amount. That’s why it is important to update nominee details every time there is a major life event.
When buying a new term plan, policyholders must declare any other life insurance policies they already have. If this information is hidden, the insurance company may reject the claim later.
In 2025, there was a major court case in India where the Supreme Court ruled that not informing the insurer about other active policies is enough reason to deny a claim. Even if the cause of death is genuine, the company has the right to refuse the payment if they were not told about other policies earlier.
This rule exists so that insurance companies can assess the risk properly and avoid misuse of multiple policies. Full honesty at the time of application is crucial.
Every term insurance policy has some “exclusions.” These are specific conditions under which the insurance company will not pay a claim. Common exclusions include:
Death by suicide within the first one or two years of policy issuance
Death during criminal activity
Death while doing dangerous activities like skydiving, racing, or adventure sports, if not covered
Death due to drug or alcohol overdose
It is very important to read the policy document carefully to understand these exclusions. Many people ignore the fine print and later face problems. If a claim falls under one of these exclusions, the insurance company has the legal right to deny it.
In 2024 and 2025, insurance regulators in India and other countries have been reviewing claim settlements closely. In India, nearly 11% of health insurance claims were rejected and about 6% remained pending due to paperwork or disputes. Life and term insurance claims also face similar issues.
Authorities are now pushing insurance companies to be more transparent and fair. However, if documents are missing, details are incorrect, or rules are broken, companies still have legal grounds to deny a claim. In some recent cases, policyholders’ families had to go to court because of claim rejections that were caused by late police reports or lapsed driving licenses in accident-related deaths.
In such cases, courts sometimes support the family and ask the insurance company to pay. But the process is long, tiring, and emotionally draining.
Here are some simple steps to follow so that a claim is not rejected:
Give Complete and Truthful Medical History: Mention all illnesses, treatments, and past surgeries when buying the policy. Even small health issues should not be hidden.
Pay Premiums on Time: Set up auto-debit from a bank account or mark reminders to avoid missing payments.
Keep Nominee Information Updated: After marriage, divorce, or having children, check and update the nominee details in the policy document.
Declare All Other Life Insurance Policies: If more than one life insurance policy is active, list all of them clearly when applying for a new plan.
Understand the Policy Exclusions: Read the entire policy carefully. Know which causes of death are not covered and avoid activities that are not included in the plan.
Keep Documents Ready[Text Wrapping Break]Store the policy document, ID proof, medical reports, and payment receipts safely. Make sure the nominee knows where they are.
If a claim is denied, here’s what the nominee or family should do:
Ask the insurance company for a written reason for denial.
Review the policy to check if the rejection is valid.
File an appeal with the insurance company’s grievance department.
If the issue is not solved, contact the insurance regulator or file a case in a consumer court.
Legal experts can help in cases where rejection is not fair or the claim is strong.
Term insurance is one of the most affordable and effective ways to protect a family’s future. But the benefit is only useful if the claim is accepted. The most common reasons for denial—like hiding health issues, missing payments, or incorrect nominee details—can be easily avoided with care and attention.
Understanding the policy terms, following the rules, and keeping documents ready can make sure that the promise of term insurance is fulfilled when it matters the most. Taking these steps today can protect a family’s tomorrow.