What in case term insurance proposal is rejected?

Mr Rancho had lead very lively life and followed a strict exercising regime. He was shocked to receive a communication from the insurance company. The letter stated that the proposal has been rejected and premium amount has been refunded.

Mr Rancho called up the agent, but he could not provide any satisfactory explanation. He was aggrieved and could not contemplate on future action. To make the matter worse, the agent called and tried to convince him to buy an investment policy as no company would issue term policy to him.

Let’s understand why this could have happened to Mr Rancho and what your options are assuming you are Mr. Rancho.

Why would insurance company reject a policy?

Most term plans are long term contract and the underwriter not only considers the present health conditions, but also family history, life style habits such as alcohol consumption and smoking habit. The proposal form and medical test are reviewed very closely and any decision is made based on a number of parameters.

Can I know the reason why policy is rejected?

Yes, insurance companies do disclose the reasons for their decision. However, you may not be competent enough to comprehend the same. Some companies do offer to discuss the reason with your personal doctor or physician. Remember, insurance companies do not have any personal bias and would be more than willing to help you.

Can the decision be reviewed?

Normally, the decision to reject a proposal is made after long deliberation. After all the insurance companies primary job is to cover lives. The decision cannot be challenged under law as it is very subjective. However, you may convince the insurer on 2nd medical tests if medical reports are flawed and highly inconsistent with your medical conditions. Should the medical reports for 2nd medical tests be satisfactory, policy may be issued.

What are other options with you?

There are more than 20 life insurance offering term plans. Different companies have different underwriting criteria. If, one company rejects your proposal, you can approach the other company. You should disclose all details in the proposal form honestly. You may be issued the term policy without any loading from other company. Sometimes, the insurance company may ask you to pay additional premium or reduce the sum assured. You can agree to terms and take whatever valuable cover you can get.

Agents and banks are normally are tied to one insurance company and may not be in a position to help you out on coverage from competing company, they may leave you stranded at this stage .Therefore, onus for getting cover is on you and it is important that you know your options. Keep in mind that you want insurance cover and there is no substitute to term plan. Under no circumstances, you should succumb to pressure and be scared to buying an investment cum insurance plan or plan in name of your spouse, child or other dependants.