How to ensure life insurance claims are accepted
Life insurance is meant to be a safeguard for the tough times in your life - to give you peace of mind in the event of a loved one's death or to guarantee your financial safety if something happens to you and you’re unable to work. So the last thing you want to have to deal with after making a life insurance claim is a rejection.
This guide is here to help you avoid some of the most common life insurance claim mistakes, and to give you the advice you’ll need in the event that your claim is rejected.
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How often are life insurance claims rejected?
According to the Australian Securities and Investments Commission’s 2016 report into the life insurance industry, 90% of claims made between 2013 and 2015 were paid out by insurers. Of the claims that were declined, the amount of claims rejected in each life insurance category was:
- Total Permanent Disability (TPD) - 16% rejected
- Trauma - 14% rejected
- Income Protection - 7% rejected
- Life - 4% rejected
How can I ensure my claim is successful?
Before you need to make a claim:
Far before you’re at the stage of needing to make a claim there a couple of things you can do to give yourself the best chance for claims success down the track.
- Closely examine your policy. If you have people in your life who are dependent on you then life insurance could be one of the most important products you ever buy. Given that, making sure you’re aware of the ins and outs of your policy makes a lot of sense so you won’t be in for any nasty surprises if you or your loved one ever needs to make a claim. Insurers will often have a number of exemptions or clauses in the fine print of their policy, so ensure you understand what these mean and whether they could potentially relate to your own situation.
- Update your nominee. Whether it’s a partner, spouse, your children or even your parents, making sure your nominee is up to date is essential, especially to avoid any complications if a claim is ever needed to be made.
- Pay your premiums. The last thing you’ll need when making a claim is to find out that you’ve missed your last premium payment. Depending on your insurer, if your premium payments aren’t up to date your cover could lapse and you won’t be able to make a claim at all. So whether you’ve set up the payment of your premium yearly or monthly be aware of when it’s due to avoid your policy becoming void.
When you need to make a claim:
Contact your insurer. As soon as an event occurs make sure you get in touch with your insurer as quickly as possible so they can begin to review your claim.
- Respond to requests. After your claim has been lodged make sure you reply to any requests from your insurer for documents or information as quickly and accurately as you can. They’re probably going to need a lot of details, so a good idea is to email through your documents - this way you have your own record of correspondence as well.
- Provide the correct information. According to financial advisors one of the most common reasons claims are rejected is because of substandard paperwork and a failure on the customer's behalf to disclose essential details. So make sure your claims are not only accurate, but free from exaggeration.
- Submit on time. Some life insurers will have a specific time limit in which you’ll need to submit your claim, so make sure you’re aware of what that is and be prompt in your lodgment.
- Get sign-off from your doctor. Getting your doctor's sign-off on your claim (when needed) will be essential, especially for disability claims. It can even be a good idea to get an opinion from multiple doctors, especially in the event that one opinion is disputed by the insurer’s doctor.
What can I do if my claim is rejected?
In the unlikely event that your life insurance claim is denied here are three options you can take:
1. First of all you’ll want to ask for your claim to be reviewed. Every life insurer has an internal dispute resolution system which they are required to put your case through in the event of a review.
2. If your claim has gone through the insurer’s internal review process and you're still unhappy with the results you’ll be able to lodge a dispute with the financial ombudsman and potentially seek legal action.
3. If you believe that your life insurer's conduct was inappropriate, or they failed in the delivery of your life insurance you’ll be able to contact ASIC and lodge a complaint with them.
Where to next?
If you're unhappy with your current life insurer, or if you’re just after a change, make sure you head over to Mozo’s life insurance hub to compare policies. Or, if you're wondering how much life insurance you need, make sure you have a read through our in-depth guide.