5 REASONS WHY YOUR LIFE INSURANCE APPLICATION COULD BE DECLINED
A life insurance policy is one of the most effective strategies to ensure the financial stability of your family or dependents in the event of your untimely death or terminal illness. It should be noted that there are a number of circumstances that can lead to an insurance company denying coverage for a claim. Below is a list of five of the most typical reasons why your Life Insurance application may be denied.
1. Specific health issues and illnesses
The fact of the life insurance industry is that if you provide all of the appropriate information and undertake all of the necessary examinations, your claim will not be denied. However, it is also true that claims can be denied even if the likelihood of this happening is extremely remote. But, if you happen to be one of the 0.001 percent of the population whose claim is denied, just picture what would happen to your dependents as a result.
One of the most compelling arguments in favour of having numerous life insurance plans is to prepare for the worst-case situation. It is possible that your claim will be rejected by one firm and authorised by another, in which case the entire money will not be lost and your dependents will still have some financial stability at the very least. In addition, if the claim is allowed by one firm, it will compel the other company to reevaluate its decision on the claim.
2. Hazardous Occupation
It is true that some professions involve a higher level of risk and danger than others, and life insurance firms are reluctant to issue coverage for those who work in what is regarded to be a particularly hazardous occupation. Among those employed in this category are airline pilots and flight engineers, logging workers, fishermen and related fishing workers, construction labourers, electrical power-line installers and repairers, drivers/sales workers and truck drivers, farmers, ranchers, and other agricultural managers, (this is not an exhaustive list, and this list is not specific to Canara HSBC OBC Life Insurance). It is not surprising that anyone employed in one of these occupations would experience a reduction in their life insurance premiums.
3. Hazardous Extra-Curricular Activities
Extracurricular activities, like hazardous jobs, have a higher risk of early death than the general population, just like they do in the workplace. Mountaineers, base jumpers, rock climbers, and other adventure sports enthusiasts may have difficulty obtaining life insurance because of the risk they run. When it comes to scuba divers, for example, most insurance companies will cover them, but the amount of coverage they receive will vary based on their diving style, frequency, and location/depth each year.
4. Limitations on Earnings
Economic or income criteria are set by life insurance firms, and a person with an income that falls below that threshold will be turned down for a policy. Life insurance firms may have different levels of restriction, and the primary reason for this restriction is that it can result in the issuance of a large number of minor policies, which reduces the amount of premium collected. Another reason that having a lower income can make it difficult to get approved is that insurance companies require the policyholder to demonstrate that they have the financial means to cover the costs of insurance coverage. This is in accordance with the concepts of ‘Insurable Interest.’ For example, if someone applies for a 2 crore rupee life insurance policy but does not have any assets or income to support the policy, there is a considerable likelihood that he or she will be denied coverage.
5. Declines in Life Insurance Applications in the Previous Year
At its foundation, insurance is a business of risk assessment and underwriting. According to a very simplified model, the premium that one pays for an insurance cover is mostly determined by the chance of claims that the insurer has factored in. It follows logically that if an insurer decides to take on an individual who has a history of rejected applications, the overall risk will rise as well. Having said that, the circumstances and reasons for the previous application rejection would generally play a considerable influence in the final decision made by the new insurer, unless the circumstances and reasons were extenuating circumstances.
Always remember that the information on this page is a generic collection and not a list of benefits particular to Canara HSBC Oriental Bank of Commerce Life Insurance. Each Life Insurance Firm has its own set of underwriting rules, and the final decision (whether to insure a life or not) is dependent on a variety of factors based on the company’s risk appetite, all of which are different for each company.