Receiving a rejection of a term insurance claim can be upsetting, especially if the policyholder is the primary financial provider for the family. Although the policyholder may not be present to address a denied claim, it is critical to understand and avoid common errors that might result in denials of term insurance claims when you buy term insurance.
In 2025, India’s life insurance sector has seen remarkable growth, with term insurance penetration rising significantly. According to the latest IRDAI data, the overall claim settlement ratio (CSR) for individual death claims stands at around 98.45%, with top insurers like HDFC Life achieving 99.68%, Max Life and Tata AIA exceeding 99%, and Axis Max Life close to 99.5%. Despite these high settlement rates, a small percentage of claims (1-2%) still face rejection, often due to avoidable issues. Understanding these reasons is key to guaranteeing your family’s financial security.
1. Incorrect Information on the Application Form
Misrepresentation of data can harm life insurance claims. You should carefully and correctly fill out the application form with information such as your age, salary, occupation, qualification, lifestyle (smoking/drinking), past policies and claims, and other factors. These are essential considerations in determining the premium. Incorrect or incomplete data may also constitute fraud and result in the termination of policy benefits.
In 2025, with advanced digital underwriting, insurers cross-verify details more rigorously using data sources and medical tests. Even minor discrepancies, like understating income or age, can lead to rejection under Section 45 of the Insurance Act if proven fraudulent.
2. Non-Disclosure of Medical History
Furthermore, the insured failed to disclose his accurate occupation or hobby, which could be considered dangerous, when purchasing term insurance; this information was crucial, as disclosing the correct details could have resulted in a denial of coverage.Disclosure of prior and current medical issues, operations, surgeries, and so on is required because it affects the coverage premium. Family members’ health information, particularly problems such as cancer, cardiovascular disease, blood pressure, or any other genetic condition, must be given to avoid rejections of life insurance claims. One has to understand that life insurance plans are often dependent on the health declarations or information that applicants provide.
Furthermore, the insured did not disclose his correct occupation/hobby, which may be dangerous in nature, while buying term insurance, and the information was so important that if he had disclosed the proper data, coverage could have been denied. Most online term insurance premium calculations also require you to include lifestyle factors such as smoking when determining premiums. If applicants withhold or provide misleading information, it may constitute a legal reason for denying a claim.
Non-disclosure remains the top reason for rejections in 2025, accounting for a significant portion of repudiated claims. IRDAI emphasizes utmost good faith—hiding pre-existing conditions like diabetes or hypertension can void the policy entirely.
3. Not Updating Nominee Information
When the life assured dies, the benefits are paid to the nominee or beneficiary, so it is critical to keep the insurance company up to date on the nominee’s details, such as their address and contact information. Failure to do so can lead to problems with your claim and potentially result in the denial of your life insurance claim. Furthermore, choose your nominee wisely. A married person can nominate their spouse or children, and if you are single, then nominating your parents or any other family member would be a wonderful idea. If the nominee is a minor, a guardian must also be listed in the policy.
Outdated nominee details contribute to delays and occasional rejections, especially with KYC requirements strengthened in 2025.
4. Policy Lapsed Due to Nonpayment of Premiums
Claims are only settled for active insurance plans. A lapsed policy cannot provide any benefits. Sometimes, policyholders neglect to make their premium payments on time. Insurance providers provide a grace period to cover this. This grace period can last up to thirty days. However, if the policyholder does not pay the premium, the policy is considered lapsed. As a result, policyholders must ensure that they pay their term plan premium on or before the payment date. For example, if a claim is filed even one day after the policy has expired, the insurance company will reject it. In such cases, the insurance company will nullify all previous premium payments.
Auto-debit mandates and reminders have reduced lapses, but missed payments still cause outright rejections.
5. Not Filling Out the Insurance Proposal Form Yourself
It’s common for clients to sign a blank check and a proposal form and hand them over to an advisor to fill in the details. But the agent won’t know everything about your health history, finances, or those of your family, no matter how close you are. Please take responsibility and complete the term insurance plan yourself. Such knowledge will also help you understand life better and choose the best features that meet your family’s needs.
6. Not Disclosing Your Existing Insurance Policies
When you buy a term insurance policy, you must declare all existing policies (including the name of the insurer, the sum assured, and the policy number). Withholding information about existing insurance policies you have purchased can get your term insurance claim rejected, as this is relevant and essentially required by the policymaker for a complete risk assessment.
7. Policy Exclusions
Each insurance provider establishes a set of criteria for all rejections of life insurance claims. This means that if you die for any of the reasons specified in the “Exclusions” section, your life insurance policy will not pay out a death benefit. Some of them include suicide, drug overdose, and death by accident while intoxicated. Insurance companies will reject claims for these causes of death.
Common exclusions in 2025 also include deaths in war zones or due to criminal activities.
8. Contestability Period
Insurance companies include a contestability clause in life insurance policies at the time of purchase. This means that if a death occurs quickly after purchasing coverage, the claim may be refused. The contestability period begins with the purchase of a policy. Insurers’ contestability terms range from one to two years. If death occurs within that timeframe, insurance companies may get suspicious and initiate an investigation.
After 3 years (per Section 45), claims can’t be rejected for innocent misstatements—only proven fraud.
Additional Reasons Emerging in 2025
- KYC/AML Non-Compliance: Failure to update Aadhaar-linked details or verify premium sources.
- Beneficiary Issues: Rare cases of malpractice, like involvement in the insured’s death.
- Fraudulent Claims: Submitting forged documents.
How to Choose a Reliable Term Insurer in 2025
Look for high CSR (>98%) and low complaint volumes. Top performers: HDFC Life (99.68%), Max Life, Tata AIA, Axis Max Life.
What to Do If Your Claim Is Rejected Wrongly
Approach the Grievance Redressal Mechanism. If you believe the insurer has rejected the claim without providing the beneficiary with a good reason, you can contact the Grievance Redressal Officer. Most insurers offer several ways for policyholders and nominees to contact them. To begin, nominees can contact the insurance company where the policyholder purchased the insurance coverage.
As mandated by the Insurance Regulatory and Development Authority of India (IRDAI), every insurance company has a dedicated grievance handling cell. The policy document usually lists the grievance cell’s details. A nominee should first visit the insurer’s website and navigate to the customer service or claims section. If the nominee does not receive a response within 15 days, he can contact the insurance company’s regional or central office’s grievance cell, stating that the grievance has not been acknowledged or addressed. If the problem is referred to IRDAI, policyholders can file a complaint with the regulator using the “Bima Bharosa system” (bimabharosa.irdai.gov.in), or they can contact a Grievance Redressal Officer (GRO) to file a more serious complaint.
Even after that, the nominee has the option of contacting the ombudsperson if no resolution is reached. The ombudsperson will hear the case and render a decision, which may ultimately assist a nominee in resolving the situation.
Prevention Tips for Smooth Claims in 2025
- Be fully transparent in applications.
- Pay premiums on time via auto-debit.
- Review and update policy details annually.
- Read exclusions carefully.
- Buy from reputable insurers with digital claim support.
Therefore, if you adhere to the above instructions, you won’t have to worry about the denial of your term insurance claims. If you haven’t already begun planning to protect your family financially in the case of your death, you should do so immediately.
Conclusion: Secure Your Family’s Future with Informed Term Insurance Choices
In 2025, term insurance remains one of the most affordable and essential ways to protect your loved ones financially. With industry claim settlement ratios hovering around 98-99%, most genuine claims are honored promptly. However, avoiding common pitfalls like non-disclosure, lapsed premiums, and outdated details is key to ensuring your policy delivers when needed most. By choosing a high-CSR insurer, being transparent, and staying proactive, you can minimize rejection risks and provide true peace of mind. Please consider starting or reviewing your term plan today, as it is essential for your family’s security.
FAQs
What is the most common reason for rejecting term insurance claims in 2025?
Nondisclosure of medical history or pre-existing conditions remains the top reason, as it breaches utmost good faith. This can lead to full policy voidance, even years later if fraud is proven.
What is the average claim settlement ratio for term insurance in India 2025?
The industry average CSR is around 98.45%, with top companies like HDFC Life at 99.68% and Max Life/Tata AIA over 99%. High CSR indicates reliable claim payouts.
Can a term insurance claim be rejected after the contestability period?
After 3 years (per Section 45), claims can’t be rejected for innocent misstatements—only for proven fraud. Early deaths may trigger deeper investigations.
How can I avoid a term insurance claim rejection due to lapsed policy?
Set up auto-debit for premiums, use reminders, and pay within the 30-day grace period. A lapsed policy offers no benefits, forfeiting all prior payments.
What should I do if my term insurance claim is rejected unfairly?
Contact the insurer’s grievance cell, escalate to IRDAI’s Bima Bharosa portal, or approach the Insurance Ombudsman for free resolution. Provide all documents.
Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or insurance advice. Term insurance policies vary by insurer; always read policy documents carefully. Claim outcomes depend on individual circumstances. Consult a qualified advisor or IRDAI guidelines for personalized guidance. Data sourced from public IRDAI reports as of 2025; figures may change.
