Term insurance claim amount rejected after death: Which common mistakes can put your family's payout at risk? List here

Many people buy term insurance to ensure their families remain financially secure in the event of their untimely death. A term insurance policy is an agreement between the insurance company and the policyholder for a fixed period, typically ranging from 10 to 40 years, during which the insurer pays the death benefit to the beneficiaries if the policyholder passes away.

For example, a person with a ₹50 lakh home loan, ₹30 lakh car loan and future expenses such as their children's education may opt for a term insurance policy with a ₹2 crore cover. This can help ensure that their family has the financial support to handle outstanding debts and expenses in their absence.

While term insurance sounds like an appealing insurance product, certain factors can lead to a claim being rejected. This could leave your family without the financial support they were counting on from the policy.

Term insurance rejection can take place because of many reasons, with it more likely to happen if you provide incomplete or inaccurate information, according to a blog post by HDFC Life. Here are some common reasons:

• Failing to disclose pre-existing conditions, such as diabetes or high blood pressure, while applying for the policy can lead to claim rejection.
• Giving incomplete or incorrect nominee information can delay claim settlement and complicate the process for beneficiaries.
• If the policyholder fails to pay premiums and the policy lapses, the family may lose the intended coverage.

• Deaths resulting from activities such as paragliding or racing are not covered if they fall under the policy’s exclusions.
• Deaths due to excessive alcohol or drug consumption is also generally excluded, depending on the policy terms and circumstances.
• If relevant information about a pregnancy was withheld when required, it could complicate claim settlement in the event of the policyholder’s death during childbirth.

Hence, it is crucial to give the most accurate information at the time of filling the application form and if you are not sure of something, it's better to undergo a full health assessment before applying for a term insurance plan.

A term insurance cover of 10 to 15 times annual income can provide a starting point, but it should not be treated as a universal formula.

For example, a person earning ₹15 lakh a year could arrive at a basic cover of ₹1.5 crore to ₹2.25 crore using the income-multiple approach. However, the actual requirement could be higher depending on the person’s liabilities, future expenses in the person's absence and dependents.

It also must be noted that individuals below 18 years of age are not eligible for purchasing term insurance. Though an age requirement is applicable for the majority of insurance companies, the limits may vary.

Eshita Gain is a digital journalist at Mint, where she joined in May 2025. She writes on corporate developments, personal finance, markets, and business trends, with a focus on delivering timely and relevant stories to a broad audience. <br><br> While her core beat lies in business and finance, she is not confined to a single niche and frequently explores stories across domains, including international relations and policy developments. <br><br> She holds a postgraduate diploma in business and financial journalism by Bloomberg from the Asian College of Journalism (ACJ), Chennai. During her time there, she received rigorous training in tracking financial data, interpreting corporate filings, and reporting on business developments. She has pursued her graduation from St. Joseph’s University, Bengaluru in a multi-disciplinary course. Her majors included Journalism, International Relations, peace and conflict studies. <br><br> Eshita has previously worked in digital marketing, which enables her to write SEO friendly copies that are clear and engaging. <br><br> Her primary interest lies in breaking down complex subjects and writing clear, accessible copies that inform readers. She aims to bridge the gap between technical financial language and everyday understanding. Outside the newsroom, Eshita enjoys reading non-fiction, and exploring new places, constantly seeking fresh perspectives and stories beyond headlines.

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