Term Insurance Claim Rejected? A Guide for the Nominee

If you are a nominee whose term insurance claim has been rejected, this explains what the insurer decision means, what you are entitled to, and how to challenge it — without jargon.

If you are reading this, someone has died and their insurer has said no. You are probably dealing with paperwork at the worst possible time. This is written for you, not for the person who bought the policy. Take it slowly — you have more time and more standing than the rejection letter suggests.

First, what the numbers actually say

Most death claims in India are paid. The individual death claim settlement ratio averaged 96.82 per cent within 30 days in FY2023-24, with private life insurers around 99 per cent and LIC at 96.61 per cent. Source: IRDAI Annual Report 2023-24. Rejection is the exception, which means the reason given should be specific and evidenced. If it is vague, that itself is worth challenging.

Why term insurance death claims get rejected

• Alleged non-disclosure of a medical condition, occupation, income or existing cover at the time of the application
• Death within the policy first year, where insurers investigate early claims more closely
• Suicide within the first twelve months from commencement or revival, which most policies exclude
• The policy had lapsed for non-payment of premium before the date of death
• Discrepancies between the proposal form and hospital or employment records
• Missing or inconsistent documentation — death certificate, cause of death, medical records

Non-disclosure is only a valid ground if what was not disclosed was material to the risk. An unrelated condition does not automatically void a policy.

The protection that most nominees are never told about

Section 45 of the Insurance Act, 1938 is the single most important provision for you to know. A life insurance policy cannot be called into question on any ground whatsoever after three years from the date of the policy, the date of commencement of risk, the date of revival, or the date of the rider, whichever is later. After that three-year mark, even a genuine non-disclosure does not entitle the insurer to repudiate.

Within three years, the insurer can repudiate for fraud or misstatement, but it must communicate the grounds in writing and it bears the burden of proving them. Check the policy commencement date against the date of death before you accept any explanation.

What to do next

• Ask for the repudiation in writing with the specific ground and the evidence relied on. You are entitled to this.
• Find the policy document and the original proposal form. Compare what was actually declared against what the insurer now alleges.
• Work out the exact gap between the policy commencement or revival date and the date of death, for Section 45.
• Gather the death certificate, medical records, and any employer or hospital documents the insurer is citing.
• Do not accept any partial or ex-gratia offer as full and final while you are still deciding whether to dispute.

Where to escalate

The route is the insurer grievance redressal officer first, then IRDAI through the Bima Bharosa portal, then the Insurance Ombudsman, whose award is binding on the insurer and costs nothing to approach. Death claim disputes above the Ombudsman monetary limit go to a consumer forum or civil court.

We have written the Ombudsman process out in full here: how to file an Insurance Ombudsman complaint in India.

You do not have to do this alone, and you do not have to decide today. If it helps to have someone read the rejection letter and tell you plainly whether it holds up, that is a reasonable thing to ask for.

Related: RiskPe's claim recovery service and how term life insurance works.