Why Do Insurance Claims Get Rejected?

According to the US Department of Labor, around 14% of all submitted medical claims are rejected. That’s over 200 million denied claims. The rejections are just as high for other types of insurance, including home insurance, car insurance, and more. For those seeking redressal from unprecedented disasters, this is a potential worry. But why do these claims get rejected? If you have a policy or two in your name, you must find out.

Different Reasons Insurance Claims Get Rejected

1.     Fraudulent Claims

The most obvious reason is when someone puts in a false claim in the hopes of collecting money from the insurance companies. In the US, fraudulent claims total $80 billion a year. Insurers end up paying up to 10% of their claims on fake claims every year. 1 in 10 owners of small businesses worries that their workers will fake work-related injuries. Due to this staggering number of false cases and the high amount of money that gets wasted on these, insurance companies are sometimes over-cautious about cases that seem suspicious.

2.     Poor Payment on Premiums

If you have a history of poor payments on your policies, insurers are less likely to compensate you (if at all). They won’t believe you as your previous behavior would suggest that you aren’t regular with your payments. Obviously, the same goes if you let your policies lapse. Insurers want to help those individuals who seem genuine and responsible enough to stay on top of their insurance premiums. If your past patterns don’t exhibit that, and you file a claim, your claim is more likely to get rejected.

3.     Inaccurate or Lack of Detail in the Claim

If you file a claim and you put insufficient details about what occurred, it’s more likely to get rejected. That’s because your claim would be less credible and confusing. It wouldn’t highlight exactly what happened and why the insurer is liable to pay you. It’s even worse if the details you put down are inaccurate or demonstrably false. That would make insurers suspect you of filing a fraudulent claim. Instead, you must put down all the details very clearly and as accurately as possible. Otherwise, your insurance claim will be scrutinized and you’ll be asked for more details. It could also be rejected and put you in a sticky situation.

4.     Incomplete Details

While filing, if the insurers find out that you’d put in incomplete information, it would make it a lot tougher to get your claim approved. If it’s a life insurance plan, you’ll need proper information about the nominees. Other plans would have different essential information. It’s obvious why this is important. Most pay-outs are calculated by taking into consideration the policy holder’s age, profession, medical history, health conditions, and more. Without the right details, your insurers won’t be able to calculate anything. Ensure you’re extra careful at the time of taking the policy. Otherwise, you can get stuck in tons of red tape and your insurance claim can get delayed or rejected.

5.     Inaccurate Background Information

Similarly, if you provide incorrect or incomplete information about yourself when you’re buying the insurance policy, it’ll come back to bother you later on. Mostly when you’re filing a claim. If your basic details are incorrect, the insurers won’t be able to give you your due. That will make the entire process complicated and you’ll have to do the paperwork to change your details. You’d have to file your claim after doing all that. You should be careful when adding your information or else you’ll suffer in the long run.

6.     Omissions and Exclusions

There are certain conditions under which insurers will not pay claims. Some are death by drug overdose, suicide, and more. Depending on your insurer, if the reason for the event has happened due to a phenomenon that isn’t covered by them, your insurance claim will be rejected. In this case, there’s not much you can do. Make sure you ask your insurance agent about their list of omitted events so that you aren’t hit with an unpleasant surprise later on.

These are the main reasons insurance claims get rejected. While it can be difficult for you to understand the nuances of these issues, you must. Otherwise, you may be left high and dry when you’re in an unfortunate situation. All the above reasons are enough for the insurance company to ask for more documentation from you. They may also interview you further to clear any doubts. Worst case scenario is that they would outright reject your claim. That’s why it’s important to have a good working relationship with a seasoned insurance agent or agency. They would guide you through all these issues, educate you on the do’s and dont’s and would help ensure that your claim gets through the system quickly and without much hassle.