Top Ten Tips for avoiding insurance claim rejection

At some stage during our life, most of us will need to make an insurance claim or be involved in an insurance claim settlement. If you follow few simple steps and precautions on your part can ensure a smooth and hassle-free claim settlement and, thus, provide all the intended financial support to the family and loved one at the time when it is needed the most in your absence.
The purpose of this article is to provide you with insurance claim help and to educate you about the insurance claim process. You will learn the important parts of an insurance claim and what all the precautions you need to take to get a speedy insurance claim settlement without much difficulty. The life insurance settlement is how the beneficiary receives payment of the death benefit. If all information on the policy is correct and it is in force when the policyholder dies, a life insurance provider cannot deny a life insurance claim. Since they are contractually obligated to pay, the only thing they can do is to withhold the benefits you are entitled to by delaying payment. This is where the insurance company assesses your insurance claim and determines whether they will pay out as per the conditions specified in your insurance policy. It is extremely important that you are honest and accurate in your statements for all life insurance claims. If you misrepresent the truth in any way, this is considered fraud and your claim will automatically become void, leaving you without recourse or reimbursement for your loss.
1) First of all ensure to provide correct details at the time of filling up the insurance policy application A material misrepresentation/ providing of wrong information is any distortion of facts given to the insurance company by the policyholder. This could be anything from concealment of the truth like hiding your existing illness or providing incorrect date of birth or giving any wrong information such as income level, occupation, residential status (Resident Indian or Non-Resident India etc) at the time of applying for the insurance policy. In order for the insurance company to deny coverage, the material representation must cause a significant difference in the amount of risk sustained by the policyholder. However, many life insurance providers will cite a misrepresentation that has nothing to do with the assessed risks or cause of death to avoid payment. So ensure to provide correct details at the time of filling up the insurance policy application. Otherwise your loved one will suffer in your absence.

2) Nomination - Nomination is a right conferred on the holder of a Policy of Life Assurance on his own life to appoint a person/s to receive policy moneys in the event of the policy becoming a claim by the assured’s death. The Nominee does not get any other benefit except to receive the policy moneys on the death of the Life Assured. A nomination may be changed or cancelled by the life assured whenever he likes without the consent of the Nominee.
Ensure nomination exists in the policy for easy settlement of claims.
Please ensure to nominate someone you wish to pass on the benefits after your death. If the nominee dies during the tenure of the Policy, the Life Assured should nominate another person in place of the deceased Nominee under section 39 of the Insurance Act.
a) What happens if there is no nomination on death of the LA (Life Assured) or what happens if both the LA and the Nominee expires in the same event?
Such claim is considered as Open Title claim. In such an eventuality a “Succession Certificate" or “Probate of will” will have to be submitted by the Claimant. A Succession Certificate is issued on application by a competent court on the question of the right to the property of the deceased. The Succession Certificate should specifically provide for disbursement of policy monies. If, however, the deceased has left a will, a probate of the will is required along with the copy of the will.

b) What if there are two or more nominees, how will the Policy Monies be paid?

The claim will be paid to nominees according to the percentage declared in the proposal. A joint discharge will have to be given. Alternatively all the nominees can give a joint discharge for payment of claim benefits in favor of one nominee, in which case the claim proceeds would be made in the name of the designated nominee

3) Ensure your beneficiary designations and static details are updated with insurance companies on a regular basis. This would ensure prompt claim settlement in the unfortunate event of death of the Life Assured.
4) Pay premiums regularly - This would ensure that Policy is in force. A lapsed policy would mean no death benefits payable to the nominee. Also, if continuing premium payments is not possible due to any reason, the insured should inform the insurance company before the policy lapses. Most insurance companies take into account genuine circumstances and make necessary provisions like making the policy a paid-up policy to help the customer
5) Keep a record of all your insurance policies and make a file of it. Maintain record of the Insurance Agent/ Insurance Company with their address and contact particulars. Ideally share this information with your loved one and educate the loved one on the process to lodge a claim. It is the responsibility of the beneficiary to inform insurance company about the claim. Inform your beneficiary or immediate family members about the policy you have taken.
6)Keep your policy pack safely.
7)It is very important to read through the Proposal form and submit factual details at the proposal stage and provide genuine documents at the time of buying a policy. In order to ensure that your claim does not get rejected, please ensure the following: Ensure that you read and answer all the questions correctly and accurately to the best of your knowledge. Ensure that you have disclosed all material facts to the Company. In case of any doubt as to whether a fact is material or not, the fact should always be disclosed also ensure that all the documents submitted by you (E.g. Age Proof, Income Proof etc) along with the proposal form are genuine. Don’t leave this responsibility to the agent, after filling up the insurance proposal form, verify once again and ensure that, all details provided in the form is correct. In normal case people used to entrust this job with the Insurance agent and they will just sign.

8) Upon receipt of your policy document, please perform the following checks - Go through the copy of your signed proposal form enclosed along with the policy document, review and ensure that all the static and other details have been recorded correctly and accurately in the policy document, In case you come across any discrepancy, please take up with the insurance company and get discrepancies corrected immediately to avoid future complications.

9) Revival of lapsed policy – If the policy has lapsed, it can be revived during the life time of the life assured, so please ensure to revive the lapsed policy to avoid future complications.

10)Loss of Policy Document – The policy document is an evidence of the contract between the Insurer and the Insured. Hence the policy holder should preserve the Policy Certificate till the contracted amount is settled. Loss of Policy Document should be immediately intimated to the Insurance company and obtain duplicate documents as soon as possible.

Understand the difference between term life insurance and whole life insurance
All life insurance involves a contract between an insurance provider and the policyholder. Upon the policyholder’s death, the insurance company pays a sum of money to the policyholder’s family. After the period of contestability in a life insurance application has passed, the contract cannot be canceled by the insurance provider for any reason.
There are two main types of life insurance: Term life insurance provides an agreed-upon amount to the insured’s beneficiaries only if the policyholder dies during the length of time specified in the policy. In contrast, whole life insurance remains in force until the policyholder’s death.

How to calculate Wealth Tax

Wealth tax is not a very important or high revenue tax in view of various exemptions. Wealth tax is a socialistic tax. It is not on income but payable only because a person is wealthy. Wealth tax is an annual tax like income tax. It is another type of direct tax by which tax is imposed on individuals coming within its purview. Pensioners, retired persons or senior citizens have not been accorded any special benefits under this Act. The valuation date for wealth tax computation is 31st March, The twelve months immediately before the computation date is considered as previous year for which wealth tax is calculated. Net wealth means taxable wealth. It means the amount by which the aggregate value of all assets (excluding exempted assets) belonging to the assessee on the valuation date including assets required to be included in the net wealth, is in excess of the aggregate value of all debts owed by the assessee on the valuation date which have been incurred in relation to the taxable assets. The wealth tax needs to be paid at the rate of one per cent (1%) of the amount by which net wealth exceeds Rs. 30 lakhs. No surcharge or education cess is payable.

The direct tax code (DTC) is expected to come into force with effect from 1 April, 2012. In it, there are lot of changes proposed and one among them is the enhancement of wealth tax exemption limit from the current Rs. 30 lakh to R. 1 crore, so everyone will, therefore, need to review their tax situation next year once the DTC comes into play.



The liability to pay tax in the case of an individual depends upon his residential status and nationality. Residential status is decided as per the provisions of the Income-tax Act

The scope of liability to wealth tax is as follows:
a.In the case of an individual who is a citizen of India and resident in India, a resident—HUF and company resident in India;
Wealth tax is chargeable on net wealth comprising of
i.All assets in India and outside India;
ii.All debts in India and outside India are deductible in computing the net wealth.
b.In the case of an individual who is a citizen of India but non-resident in India or not ordinarily resident in India, HUF, non-resident or not ordinarily resident in India and a company non-resident in India;
i.All assets in India except loan and debts interest whereon is exempt from income-tax under section 10 of the Income-tax Act are chargeable to tax.
ii.All debts in India are deductible in computing the net wealth.
iii.All assets and debts outside India are out of the scope of Wealth Tax Act.
c.In the case of an individual who is not a citizen of India whether resident, non-resident or not ordinarily resident in India:
Same as in (b):

The credit balance in a Non-resident (External) Account is exempt from wealth tax provided the depositor is a person resident outside India as defined in the Foreign Exchange Regulation.



Taxable assets under the Wealth Tax include

· Residential house or commercial building or Guest house

· Automobiles

· Jewellery, bullion, utensils of gold, silver, or other precious metals;

· Yachts, boats and aircraft;

· Urban land located within specified limits; and

· Cash in hand in excess of Rs.50, 000/-

Assets exempted from Wealth Tax

· Property held under a trust or other legal obligation for any public purpose of a charitable or religious nature in India subject to the satisfaction of the stipulated conditions;

· House occupied for the purpose of business or profession;

· One house or a part of house used for residential purpose;

· Property held under a trust

· Assets held as stock-in-trade in business;

· Urban land on which construction is not permissible;

· Co-parcenary interest in a Hindu Undivided Family (HUF);

· Certain specified government bonds;

· Resurgent India Bonds;

· NRI Bank Account Deposits and FCNR Deposits; and

· Assets belonging to Indian repatriate.

Deemed Assets
Assets as specified above and belonging to the non-resident are included in computing the net wealth. In some cases, certain assets which do not belong to the non-resident are included in his net wealth when they are held or are transferred with the intention to avoid wealth tax. These are referred to as deemed assets, which include:

· Assets transferred by one spouse to another;

· Assets held by a minor

· Assets transferred to a person or an association of persons;

· Assets transferred under revocable transfers;

· Assets transferred to close relatives;

· Interest of a partner in a partnership firm;

· Self-acquired property converted into joint family property;

· Gifts made by mere book entries; and other assets which would otherwise belong to the non-resident.



Wealth tax is levied on the ‘net wealth’ which means that from the aggregate of all assets (including deemed assets but excluding exempt assets) the value of debts owed on the valuation date shall be deducted subject to the satisfaction of the following two conditions viz. Only debts which are ‘owed’ on the valuation date are deductible.

Debts should have been incurred in relation to those assets which are included in the net wealth of the assessee



Every person is required to file a return of net wealth in form prescribed by Income Tax Authorities from time to time if his/her net wealth or net wealth of any other person in respect of which he is assessable under the Act on the valuation date is such an amount as to render ‘ him liable to wealth tax. The dates of filing the return are the same as under the Income-tax Act for filing returns. Where wealth tax is payable on the basis of return to be furnished