Motor Insurance: Know These Common Reasons That Lead To Claim Rejections

The Monsoon season has arrived, and car owners living in metro cities already feel the pinch of vehicles grappling with or drowning in pockets of flood water across various localities. Those with a comprehensive motor insurance policy would rest assured of dealing with any unforeseen situation arising during this weather or otherwise. However, in many instances, vehicle owners find their motor insurance claims rejected and end up bearing huge expenses out of their own pockets. To avoid any such situation, are you aware of the common reasons that could lead to the rejection of your claims? 

Says, Parthanil Ghosh, Director, and Chief Business Officer, HDFC ERGO General Insurance, “An insurance contract is based on the principles of utmost good faith, wherein both the parties i.e. insurer and insured should act in good faith and the Insured must not suppress and disclose all facts to the Insurer. If a policyholder files a fraudulent claim to get undue benefits from the policy, the insurer will reject the claim and may also impose legal penalties.”

Also read; Here’s How You Can Effectively Insure Your Motor Vehicle From Cyclone Damage

Other than the cases of fraudulent claims, there are some nit-grits related to motor insurance that lead to claim rejections, such as:

1. Rejections Due To Waiting Period: Every insurance policy comes with a waiting period during which the loss or damages are not covered. A claim that arises during that period will not be covered by the insurer.

2. Driving Under Influence: Any loss or damage that occurs under the influence of alcohol or drugs, etc., can lead to claim rejection. For instance, motor vehicles must be driven on public roads in compliance with the Motor Vehicles Act. “However, any infringement viz. driving the vehicle without registration, driving under the influence of alcohol or without a valid license, etc., can lead to claim rejection,” Ghosh highlights.

3. Car Modification Without Informing the Insurer: Many car owners modify their vehicles with non-OEM accessories to improve their aesthetics. While some modifications like safety equipment, etc. can help in reducing premiums, however, it is mandatory to inform the insurer about any modifications to the vehicle. “In case of non-disclosure or misrepresentation of such modifications, the insurer will not cover the damages caused to or by such alterations.”

4. Violation of T&Cs: In case of any violation of the terms and conditions or non-disclosure or misrepresentation, the insurer will not cover the damages caused to or by such alterations. For instance, if a personal car is used for commercial purposes and meets with an accident, the insurer may not accept the claim.

“Similarly, if the loss or damage arises due to a manufacturing defect in a vehicle, the claim will not be accepted,” Gosh remarks.

5. Delayed Submission of Claims: It is essential to register a claim within a stipulated time frame, therefore, the insurer will reject the claim if the policyholder doesn’t file the claim with the necessary documents within the predefined tenure.

6. Know the Exclusions: It is necessary to understand the exclusions of the insurance policy before availing any services to avoid financial burden. The insurer will reject the claim if it is pertaining to those conditions that are not covered under an insurance policy. For example, several parts of your car have been damaged in an accident. If you own a standard policy, the insurer will apply depreciation to the bill wherein you may end up paying 25-30 per cent out of your own pocket.

Additionally, your claim may get rejected if:

• It is beyond the policy risk period

• The claim arises due to due to gross negligence of the policyholder

• You repair the vehicle post-accident without informing the insurer

• Driving the vehicle after an accident without taking due precautions leading to aggravation of loss

Remember, any vehicle is bound to experience a gradual wear and tear with continuous use. While this is inevitable, insurance policies do not cover the gradual depreciation of a vehicle. Even if you have opted for a comprehensive motor insurance policy, any claim against wear and tear is bound to get rejected.