We know that making an insurance claim can sometimes be a tricky business. You’ve got to provide enough evidence to substantiate your claim, and sometimes your claim can be voided if you can’t show enough proof. Like, the other day I tried to claim from my life insurance policy.
The insurance company took one look at me and sent me packing without giving me a chance to explain. I guess walking unaided into their office made it hard for me to prove death or total permanent disability. Here are 3 other terms and conditions that prevent you from claiming your life insurance.
Insurance fraud comes in many forms, but there are two common variations. The first is the kind you’re probably already thinking of – what is known as “premium fraud”. This means that when you applied for the policy, you conveniently left out certain information in order to pay a lower premium. You would think this is common sense, but given the number of people that act blur even after knowingly doing this, it seems people aren’t as smart as they should be.
For example, you’re a casual smoker, but you don’t want to pay the higher premiums smokers pay, so you indicate that you’re a non-smoker and hope the medical check-up doesn’t reveal otherwise. Or maybe you don’t mention a certain medical condition you have, and successfully lower your premium as a result.
If the insurance company can prove that your application was fraudulent, they have the right to void your policy at any time. Can’t smoke your way out of this one.
The other common kind of fraud is “fraudulent claim”, where you try to claim for a condition that you don’t exactly have. Surprisingly, most fraudulent claims actually originate from a legitimate complaint.
Take, as an illustration, a Mr Tay who wants to claim for total permanent disability. Total permanent disability is defined as the complete inability to engage in any business/occupation, or total and irrecoverable physical loss, due to accident or sickness. Mr Tay simply has a poor back that causes him great pain every now and then. The pain doesn’t happen all the time, but when he experiences it, he just wants to stop working altogether.
What does he do? He lies to his doctor and says that the back pain happens more often than it actually does. He makes up other symptoms that he’s not experiencing in order to justify “total permanent disability”. Even though his back pain is real, what he’s done is made a fraudulent claim, and the insurance company has the right to void his policy if they find out. It’s too late for him to back out.
Needless to say, if you’re planning to cheat your insurance company, they are more than justified in voiding your policy should it be discovered.
It’s always tragic when someone feels so desperate that they choose to take their own life. It’s even more tragic if the circumstances are such that the insurance company is within their right to deny claims by the beneficiaries of the deceased.
In Singapore, the general rule is that the insurance company doesn’t need to pay if the suicide happens within the first year since the policy was taken out. The rationale behind is this to discourage those with suicidal tendencies from buying the best kind of life insurance and then killing themselves soon after the first premium payment clears, to benefit their next of kin.
Although insurance companies won’t pay out any claims on the life insurance policy of anyone who commits suicide within a year, they will refund any premiums paid on the policy to the grieving beneficiaries.
Generally, if the life insurance policyholder dies by suicide a year (or more) after of paying the policy premiums, it would be possible to claim the life insurance payout. Believe it or not, insurance companies do have a heart.
3. Non-Payment of Premium
It seems obvious, but if you don’t pay the premium on your life insurance policy, the insurance company will terminate the policy. Any claims that come in after the policy has been terminated will not be valid. The good news is, most insurance policies have a grace period of 30 days after the premium due date. During this time, the policy will still be in force, so you can still make a claim if you haven’t paid the premium yet.
In cases where the insurance policy has a cash value, it is up to the insurance company’s discretion not to terminate the policy due to non-payment of premium. Instead, the insurer may give you a “loan” to pay for the premium. Because it’s a loan, it keeps incurring interest! Once the amount of the loan and the interest exceeds the cash value of the policy, they terminate it since it no longer has cash-in value.
Honestly, terminating a policy because of a single missed premium payment does seems a little unfair. What if a policyholder has been making regular premium payments all their lives and then, due to an accident or illness, ends up missing out on paying their premium when they need the policy most? Perhaps insurance companies could take into account the reasons behind the non-payment of the premium, and deal with it on a case-by-case basis.
Have you had problems claiming your life insurance policy? Share your story with us.