A jarring data shared by stock broking platform Zerodha on social media platform X shows that 30% of term life insurance applications filed by Indians get rejected — meaning a large number of people are being denied term insurance right at the start, before they ever become policyholders.
While many people usually fear the rejection of their insurance claims, this analysis shows that many people cannot even get the policy in the first place — as almost one in three applications are rejected during underwriting, which is the insurer’s evaluation stage.
Major reasons for term insurance rejection
The post, which takes information from Ditto, highlighted the major rejections for term insurance applications, which include factors like medical conditions, financial eligibility, lifestyle habits and documentation, among others. Here’s a lowdown.
1. Medical conditions
A staggering 46% or nearly half the applications get rejected due to underlying medical conditions. Insurers may reject applications due to pre-existing diseases like high blood pressure, diabetes, etc. The only way to get the term insurance is after the health markers show a significant improvement.
2. Financial eligibility
The second biggest factor is financial eligibility, with 32% applications getting rejected on this factor, as per Ditto data. To ensure your applications don’t get rejected, maintain a clean ITR record with proper income proofs.
3. Occupation
Being in some high-risk jobs also runs the risk of the application for term insurance being rejected. Some 6% rejections are based on occupation, and the way around it is to apply for a lower cover first or apply to insurers who accept your area of work.
4. Legal issues
Nearly 4% of applications run into the soup on legal issues like pending criminal cases. Until and unless these cases are cleared, getting your application approval has a bleak possibility.
5. Documentation
A significant number of rejections (4%) are due to incorrect or a lack of proper documentation. As a tip, Ditto advised keeping ITRs, salary slips, bank statements and medical documents ready to avoid rejections on these grounds.
6. Lifestyle and habits
4% of the applications are rejected due to lifestyle habits. Therefore, it’s important to disclose any such habits and hobbies and their frequency, as insurers do consider applications if they are occasional.
7. Geographic risks
Where you live also poses risks of application rejection. Therefore, choose insurers that accept your country and keep travel and employment proofs ready to facilitate the application process.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
