InvestorQ : While insurance is a necessary protection for everyone, are there circumstances when insurance cannot really protect me?
Rutuja Nigam made post

While insurance is a necessary protection for everyone, are there circumstances when insurance cannot really protect me?

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Arti Chavan answered.
1 year ago
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We live in a market where insurers are literally falling over each other to sell you insurance policies. After all, everyone has sales targets these days and so hard selling is par for the course. We have a reached a stage where in if you have a risk, you can get an insurance cover. From life and medical covers at one end of the spectrum, insurance companies provide insurance for a variety of other requirements like protection against fire, theft, floods, acts of God, loss of employment, impairing of assets, exit of key employees etc. There is a very important aspect, however, which anyone taking insurance needs to understand. There are some specific occasions when your insurance policy will not protect you. Such exceptions are normally mentioned in the fine print of the insurance contract, but most people who buy insurance rarely bother to read the fine print. Let us understand the point of fine print with a case of a person who undergoes a heart surgery and then his medical insurance gets rejected. Here is how.

When Rasik Dave underwent his bypass surgery and put forth his claim for Rs.350,000/- to his insurance company, it was summarily rejected. When a shocked Mr. Save enquired, the insurance company informed that the deterioration in the condition of his heart was too high to have happened in the last few months. Since his policy was only 1 year old, there were obviously some facts that Vinod would have hidden from the insurance company. The fact was that Rasik suffered from diabetes which he had not mentioned in his insurance declaration. Remember, insurance is a contract of “Uberimmae Fidei”, meaning a contract of “Utmost Good Faith”. It is therefore necessary for the insured to disclose all possible conditions known to him to the insurer. For example, even if your sales person tells you not to disclose certain ailments, you are still duty bound to disclose the same to your insurer. The onus is you the insured, since it is a contract of good faith. One needs to understand the conditions under which your insurance may not actually protect you…

Life insurance: When can a claim are typically refused?

Giving incomplete information or giving incorrect information about you is a breach of contract under the life insurance agreement. If you have had any surgeries or suffer from any health issues, however small, make a clean disclosure to the insurer. Smoking and drinking alcohol are considered to be health risks by insurance companies. These facts have to be disclosed to your insurance company while taking your policy. Many agents may entice you with the “No medical test” carrot. Make it a point to take the medical test; it is beneficial to you in the long run.

If there are additional risks in your job, disclose it to the life insurer. Certain jobs which entail working in high seas, oil rigs, mines etc are classified as high risk jobs. If you disclose these details, your premium may be higher but you do not run the risk of rejection. Above all, ensure that your policy does not lapse due to non-payment of premium. It would be really unfortunate to lose your term insurance cover just because you forgot to pay your premium. All the above are cases when your life insurance policy may not be able to protect you. In most cases, you may have to pay a higher premium or may get a smaller cover but it is still worth it.

There are two additional points to note here. Remember, certain health concerns like diabetes, obesity, coronary problems etc are hereditary. If you are genetically prone to such health issues, it is best to make a clear disclosure to the insurance company. Secondly, if you have existing life covers from other insurance companies, you must disclose to the insurer so that they know your extent of overall risk cover. Not disclosing, again, can leading to your insurance claim being rejected.

Health Insurance: When your medical cover will not be able to protect you

Most medical insurance policies do not provide protection in the first 6 months from the time the policy is activated. Not disclosing key medical conditions can be a reason why medical policy claims may not cover you. If your hospitalization has happened under suspicious circumstances like attempt to commit suicide or drug overdose the medical insurance policy may not be in a position to protect you. Thirdly, like in the case of life insurance, never allow your policy to lapse for non-payment of premiums. You may end up paying a steep price for the same.

The onus is on you to ensure that certain health concerns like diabetes, obesity, coronary problems etc are disclosed if there is a hereditary proclivity. If you are genetically prone to such health issues, it is best to make a clear disclosure to the insurance company. Secondly, if you have existing life covers from other insurance companies, disclose to the insurer so that they know your extent of overall risk cover. Not disclosing, again, can leading to your insurance claim being rejected. Claiming from multiple insurers is fraud and you are liable to be prosecuted.

Motor Insurance: When can your motor claim are rejected by the insurer?

When it comes to motor insurance the first thing you need to ensure is that the vehicle is only driven by a person who has a valid driving license. Driving without a valid license will lead to the insurance company rejecting the claim and the policy will not protect you for the losses. Insurance companies can also reject your claim on the ground that vehicle was overloaded at the time of the accident, speeding beyond limits or the driver was under the influence of alcohol. Finally, ensure that your premiums are paid in advance, the Pollution-Under-Control (PUC) checks are updated and third party insurance is a part of your package. Lapses on any of these aspects can lead to your car insurance failing to protect you.

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