Top 5 Reasons for Life Insurance Policy Rejection
| 1. Specific Health Conditions and Illness |
| 2. Hazardous Occupation |
| 3. Hazadrous Extra-Curricular Activities |
| 4. Income Limitations |
| 5. Previous Declines on Life Insurance Applications |
1. Specific Health Conditions and Illnesses
The reality of the life insurance industry is if you correctly give all the information and undergo all the required check-ups, your claim will not get rejected. However, it is also true that claims do get rejected even if the probability of this is negligible. But, if you end up being one of the 0.001% of the population whose claim got rejected, imagine what would happen to your dependents.
Having a contingency plan for such a scenario is the best reason for having multiple life insurance policies. If the claim gets rejected by one company and approved by another, the entire sum is not lost, and your dependents will still have at least some financial stability. Also, if the claim gets approved by one company, it will force the other company to reevaluate its decision.
2. Hazardous Occupation
Some professions carry a higher degree of risk and danger than others, and this makes life insurance companies reluctant to approve policies for people working in what is considered a particularly hazardous occupation. Some occupations that belong to this category are Airline pilots and flight engineers, Logging workers, Fishers and related fishing workers, Construction labourers, Electrical power-line installers and repairers, Drivers/sales workers and truck drivers and Farmers, ranchers, and other agricultural managers(this is not an exhaustive list and neither is this list specific to Canara HSBC Life Insurance). It is one of the main life insurance policy rejection reasons that one mist consider before buying the policy.
3. Hazardous Extra-Curricular Activities
Like hazardous occupations, there are also extracurricular activities that are considered hazardous and carry a higher risk of premature death. Participants in such activities as mountaineering, base jumping, rock climbing, and other adventure sports may find it difficult to get life insurance. For example, in the case of scuba divers, most insurance companies will insure them, but it depends on the type of diving they do, the number of times they dive a year, or the place and depth that they usually dive.
4. Income Limitations
Life insurance companies have a certain level of economic or income criteria, and a person whose income is below that level will be denied a policy. That level might vary between life insurance companies and the main reason for this restriction is that it can result in issuing a large number of small policies that produce reduced premium flows. Yet another reason that lower income can impede your approval is that the insurance companies need the policy owner to justify their ability to sustain the cost of insurance coverage. This follows the principles of 'Insurable Interest'. For example, if someone wants a 2 crore rupees life insurance policy but has no assets or supporting commensurate income, there is a high probability that he or she won't be approved for coverage.
5. Previous Declines on Life Insurance Applications
Insurance, at its core, is a business of underwriting risk. In a very simplistic model, the premium that one pays for insurance coverage depends largely on the probability of claims factored in by the insurer. It follows logically that an individual with a history of declined applications is taken on board by an insurer, and then the overall risk increases. Having said that, the circumstances and the life insurance rejection reasons would normally play a significant role in the final decision by the new insurer.
