Common Reasons Why Motor Insurance Claims Get Rejected

A motor insurance policy is a financial tool that acts as a safety net in the unfortunate event of an accident, theft, vandalism, or natural disaster. Covering vehicles, people, and third-party property is a wise investment and, at the very least, legally mandated up to a minimum limit. However, if the claim is rejected when the time for payout finally arrives, it can exacerbate an already unfavourable situation.

From repair costs to hospital bills and legal fees, if a case gets lodged, you must already be drowning. Receiving a claim rejection in such a situation is the worst financial pit. It is a common and easy practice to blame the insurance company in such situations. They are labelled as money-hungry corporations eager to collect premiums but unwilling to approve valid claims. But that is the question. Were the claims valid?

Why Do Motor Insurance Claims Get Rejected?

While insurance policyholders might feel cheated when they file a claim and it gets rejected, it is not the insurance company trying to defraud you. It is because the policyholder did not file a valid claim. While there can be many reasons that render the claim invalid, some of the major ones are:

Unlicensed Driving

In India, having a valid driver’s license is essential for driving. Driving without a valid license is a criminal offence in India. You must be at least 18 years old and possess the required skills to obtain one. So, if you have been caught driving without a license and your vehicle is damaged, your claim will be rejected.

Commercial Use Of Vehicle

Insurance requirements for non-commercial vehicles differ from those for commercial vehicles. So, if you are driving a commercial vehicle with a non-commercial policy and get into an accident, your insurance policy will not cover the damage or the claim.

Drunk Driving

Driving under the influence of alcohol or drugs is illegal and voids your motor insurance. If an accident occurs while the individual is intoxicated, the insurer is not liable to cover damages. This violation of traffic laws and policy terms results in outright claim rejection, regardless of the extent of fault or damage.

Policy Lapse

A lapsed policy means your vehicle is not covered. If an accident occurs even a day after expiry, your insurer has no obligation to honour claims. Driving with a lapsed policy, even en route to renewal, renders you uninsured and automatically disqualifies any claims made post-incident.

Unpaid Premiums

If your premium payment is not made or is delayed, your policy may be suspended or cancelled. Any claim made during this inactive period is likely to be rejected. Timely premium payments are essential to ensure your coverage remains valid and uninterrupted, especially during emergencies.

Delay In Intimation

Once damage to your vehicle is done, time is of the essence. While there may be more pressing matters to attend to, such as filing an FIR (First Information Report) or seeking medical treatment, never forget to notify your insurance company promptly.

Claim Filed Too Late

While promptly informing the insurance company about the damage is crucial, filing the claim promptly is also vital. All insurance companies have their time limit, starting from the day of the damage, when you should file the claim. If the claim is filed after the deadline, it will be rejected.

Fraud

One major reason for claim rejection is fraud. Fraud can take the form of misinformation provided in documents when purchasing a policy or making false statements when filing a claim. Therefore, when purchasing a policy or filing a claim, ensure that you are not attempting to defraud the company.

Consequential Loss Due To Depreciation

If your vehicle has suffered any severe damage due to an unavoidable loss, which is also called consequential loss. These occur due to depreciation or normal wear and tear over time. So, if that is the reason for the loss, your claim will be rejected.

Additional Car Accessories

Vehicle modifications and accessorisation are only allowed to a certain extent, depending on the nation’s laws. Any additional accessorisation that is not permissible or pre-approved is a leading cause of claim rejections. Therefore, if you plan to modify your vehicle or install additional accessories, ensure that these modifications will not affect your claim.

Disobeying Traffic Rules

If you have been caught disobeying traffic rules, which is the cause of the damage to the vehicle, then your claim will not be accepted. Following all traffic rules at all times is a prerequisite. Breaching such laws is a sure-shot way to get your claim rejected.

FAQs

• Can using a private vehicle for ride-sharing lead to a claim rejection?

Yes, using your private vehicle for ride-sharing without commercial insurance can void your policy and lead to claim rejection in the event of an accident.

• Does installing unauthorised tracking devices affect insurance claims?

Yes, installing unapproved GPS trackers or tampering with the vehicle’s electrical system can violate terms and lead to the rejection of insurance claims.

• Will a lack of vehicle maintenance history cause claim issues?

If insurers suspect poor upkeep contributed to the damage, missing maintenance records can lead to suspicion and possible denial of your claim.

• Can multiple small claims increase rejection risk for future ones?

Yes, frequent small claims may flag you as a high-risk individual, leading insurers to scrutinise or reject future claims more aggressively.

• Is claim rejection possible if another driver uses your insured car?

If the driver was unauthorised or unlicensed, the insurer might reject the claim even if the vehicle was insured.