Insurance is purchased with the expectation of financial protection during unforeseen events. Whether it is hospitalisation, vehicle damage, or property loss, policyholders rely on insurance coverage to reduce sudden financial burdens. However, many individuals face disappointment when their insurance claim rejected notice arrives. In India, every year, thousands of policyholders receive a refusal in insurance claims because of some technical mistakes, the absence of documents, or ignorance of the policy terms.
Understanding Common claims rejection reasons is essential for anyone purchasing or using General Insurance policies. Awareness gives the policyholders the strength to make correct claims, ensure that compliance is maintained, and greatly enhance the chances of approval.
This guide explains the most common reasons for rejection of insurance claims, how insurers evaluate claims, and practical steps you can take to avoid disputes.
What is Claim Rejection in General Insurance?
A claim rejection is when an insurer refuses to pay partial or full compensation on the claim that has been presented before him or her. In the case of claims that are denied by an insurer, the insurer writes a formal letter explaining the rationale and policy provisions in that regard.
Claim rejection is not the same as claim delay or partial settlement:
- Claim delay: It pertains to situations where the claim is pending due to the insurer needing to obtain more information, facts, or clarifications before the claim is processed.
- Partial settlement: In this case, only eligible expenses are approved, while non-payable or excluded costs are deducted as per policy terms.
- Claim rejection: This means the claim is not payable at all under the policy conditions and is formally closed by the insurer.
Types of General Insurance Claims
Specifically, prior to discussing rejections, one has to comprehend the scope of the General Insurance Claims, which is broadly covered by:
- Health insurance claims, covering the costs of hospitalisation, medical treatments and other associated healthcare costs up to specified limits in policy terms.
- Motor insurance claims that involve vehicle damage, theft, or third-party liabilities arising from road accidents.
- Travel insurance claims offer medical emergency coverage, trip cancellation, baggage damage, and passport problems when traveling.
- Home and property insurance claims apply to damages caused by fire, theft, natural disasters, or structural loss.
- Personal accident insurance claims offer compensation in case of accidental injury, disability, or death.
8 Common Claims Rejection Reasons for Insurance
Claims denial in India is recurrent due to a few factors common among insurers. The majority of those reasons are procedural or contractual and can be evaded by being more aware and taking action in time.
Below are the most frequent reasons for insurance claim rejection observed across Indian insurers.
1. Non-Disclosure or Misrepresentation of Information
One of the most severe and standard causes of rejection of insurance claims is non-disclosure or misrepresentation of material facts when the proposals are made. Material facts are those details that will affect whether or not the insurer provides coverage, or what the premium will be.
Material facts include:
- Already existing diseases or chronic ailments, or treatments that were pre-existing before the purchase of the policy.
- Previous surgeries or hospitalisations that may affect risk assessment.
- Habits like smoking, alcoholism, or tobacco use.
- Past history of insurance, such as past rejection of policies or claims.
Ways To Avoid It:
- Declare all known medical conditions honestly at the time of proposal.
- Never suppress health history to obtain a lower premium.
- Review proposal forms carefully before submission and retain a copy for reference.
2. Claim Filed During Waiting Period
The majority of insurance policies involve certain waiting periods. Such waiting periods allow the insurance companies to deal with risk and avoid immediate claims with high value when the policy has been bought. In case the treatment is taken within this period, the claim can be denied making an insurance claim rejected status. Examples include:
- An initial waiting period, usually the first 30 days after policy issuance.
- Disease-specific wait times that are relevant to hernia, cataract, or joint replacement.
- Pre-existing disease waiting periods which typically range between two to four years.
Ways To Avoid It:
- Understand all waiting periods clearly before purchasing the policy.
- Avoid assuming immediate coverage for all illnesses.
- Plan elective or non-emergency procedures only after waiting periods are completed.
3. Treatment Not Covered Under Policy
Every insurance policy contains a clearly defined list of exclusions that specify treatments and expenses not covered. Such exclusions are typical with major insurance companies and lead to large numbers in cases of rejection of health insurance claims.
Common exclusions include:
- Cosmetic or aesthetic procedures that are not medically necessary.
- Dental treatments, unless caused by accidental injury.
- Alternative therapies that are not specifically listed in the policy.
- Non-medical expenses such as registration charges, toiletries, or food costs.
Ways To Avoid It:
- Read the exclusions section thoroughly before using the policy.
- Confirm coverage with the insurer or agent before planned treatment.
- Check room rent limits, sub-limits, and admissible expense lists carefully.
4. Delay in Intimation of Claim
A majority of insurance policies require policyholders to report the occurrence of an incident to the insurance company within a period of time. Failure to inform the insurer within the required period of time is usually followed by the rejection of the claim by the insurance company based on a violation of procedure. For example:
- Health insurance generally requires intimation within 24 to 48 hours of hospitalisation.
- Motor insurance requires immediate reporting after an accident or theft.
Ways To Avoid It:
- Report the case to the insurer immediately if an accident happens, irrespective of the pending documents.
- Obtain and retain the claim reference number.
5. Incomplete or Incorrect Documentation
Missing or inaccurate documents are among the most practical reasons for rejection of insurance claims. Insurers rely completely on documentation to verify authenticity and eligibility. Common missing documents include:
- Hospital discharge summaries and admission notes.
- Original bills, receipts, and payment proofs.
- FIR copies in case of accident, theft, or injury.
- Doctor’s prescriptions and consultation notes.
- Diagnostic and investigation reports.
Ways To Avoid It:
- Present documents as per the checklist by the insurer.
- Keep photocopies and digital backups of all records.
6. Policy Lapse Due to Non-Payment of Premium
In case the insurance cover is not active during the occurrence of the incident, the claim is automatically invalidated. Most of the policyholders lose the renewal dates, particularly when they have an annual policy, which leads to the insurance claim being denied.
Ways To Avoid It:
- Enable auto-debit or renewal reminders.
- Renew policies before expiry.
- Avoid breaks in coverage to maintain continuity benefits.
7. Non-Adherence to Policy Terms
There are various financial conditions of insurance policies which have a direct influence on claim settlement. Even though reimbursement may still be made, the cases when insurance claims are refused are primarily the consequence of a misunderstanding.
Policy conditions may include:
- Room rent limits that restrict daily accommodation charges.
- ICU caps are applicable per day.
- Co-payment clauses require the insured to bear a percentage of costs.
- Mandatory deductibles applicable to certain claims.
Ways To Avoid It:
- Select a sufficient sum insured depending on the inflation of medicine.
- Know the percent co-payment prior to purchase.
- Select hospitals and rooms within policy-defined limits.
8. Fraudulent or Inflated Claims
Insurers have specially trained auditors, investigators to uncover anomalies. Any move towards inflating costs, forging bills or falsifying facts lead to instant denial of claims. Fraud leads not only to rejection of insurance claims but may also result in policy cancellation.
Ways To Avoid It:
- Submit only genuine and verifiable bills.
- Avoid third-party agents promising “guaranteed claim approval.
- Cooperate fully during insurer verification and investigation processes.
Make Informed Insurance Decisions
Insurance does not only mean buying a policy, but knowing what is demanded of one with regard to the policy. The majority of claim disputes are caused by ignorance and not the denial of rights.
Understanding common reasons for insurance claim rejection helps policyholder plan better, choose appropriate coverage, and submit claims confidently and correctly.
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FAQs
Why do insurance claims get rejected?
Claims are rejected due to non-disclosure, waiting period, exclusions, delayed intimation, or incomplete documentation.
Can a rejected insurance claim be reconsidered?
Yes, if additional documents or clarifications support eligibility, reconsideration can be requested.
Where can I complain if my claim is unfairly rejected?
You may approach the insurer’s grievance cell, the IRDAI IGMS portal, or the Insurance Ombudsman.
Is health insurance claim rejection common?
Yes, especially due to waiting periods, pre-existing disease clauses, or incomplete paperwork.
What are popular rejection causes of car insurance claims?
Driving without a valid license, failure to intimate in time, drunkenness or lack of correspondence in the details of the accident.
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