When people purchase insurance, they anticipate financial security in case of emergency. However, every year, a lot of claims are denied- not due to unwillingness to accept them on behalf of the insurers, but because the customers commit small but significant insurance errors, without knowing it. Such mistakes cause gaps related to documentation, policy knowledge, and compliance , which eventually result in claim rejections. Whether it’s your health, vehicle, home, or Business Insurance, understanding what to avoid is equally important as selecting the right insurance coverage.
This blog identifies the 10 most frequent errors that policyholders commit when submitting insurance claims, and how you can protect your business and personal finances through informed vigilance.
How Insurance Claims are Evaluated and Why Rejections Happen
It is essential to know how an insurance company considers claim requests, prior to getting into details of certain insurance blunders. Each claim undergoes a verification procedure that looks into:
• Whether the event is covered under the policy
• Whether the insured complied with all the terms and conditions of the policy
• Whether the loss is supported by the required documents.
• The claim was filed within the stipulated timeline.
In case any of these conditions are not satisfied, the insurer can issue claim rejections. It is therefore important to know how to utilize a policy effectively.To you and your business, tracking of procedures can spell the difference between adequate compensation and a financial setback.
Let’s now proceed to some common mistakes, one by one.
1. Failing to Read the Insurance Policy Carefully
Buying insurance without reading the fine print is one of the most prevalent insurance mistakes. Most policyholders overlook important information including ( but not limited to):
• Inclusions
• Exclusions
• Limits in Sum insured
• Deductibles
• Waiting periods
• Claim procedures
This ambiguity usually results in claim rejections, simply because the customer thought something was included when it was not.
For example, a fire insurance policy may exclude losses caused by electrical overloading. A health policy may not cover certain pre-existing illnesses for the first few years. By having proper knowledge of what is covered and what is not, you can ensure there are no surprises when filing insurance claims.
2. Providing Wrong or Partial Information
The other significant mistake that results in claims rejection is the submission of wrong or partial information during the process of buying a policy. This includes:
• Incorrect age or occupation details
• Hiding medical conditions
• Understating risk factors
• Incorrect business turnover while acquiring Business Insurance
The information given in the proposal form helps the insurers to determine the risk. The insurance company is at liberty to reject claims in case discrepancies emerge in the future. This applies to personal insurance as well as for policies protecting your business.
To prevent this error, you must always be honest with the information you are disclosing, even if it raises the premium a little. It is preferable to spend extra money upfront, than face rejection when an emergency strikes.
3. Delaying the Intimation of a Claim
In all insurance policies, time limits within which a claim should be reported are clearly stated. The postponement of such an intimation is one of the worst insurance errors because in such cases, insurers might not be capable of properly examining the incident after a long gap.
For example:
• Health insurance claims must be reported within 24–48 hours of hospitalization
• Motor accident claims generally need immediate intimation
• Fire or theft claims for your business must be sent to the insurer within strict, documented timelines
A late report often leads to claim rejections, as insurers see this as non-compliance with policy conditions. Immediate intimation ensures the insurer can conduct surveys, gather evidence, and process your claim smoothly.
4. Lack of Proper Documentation
Even a valid claim can get rejected if you don’t submit required documents. Missing documentation is one of the simplest yet most frequent insurance mistakes made by policyholders.
Depending on the type of claim, you may need:
• Bills and invoices
• Doctor’s prescriptions
• FIR or police reports
• Repair estimates
• Photographs of the damage
• Survey reports
• Business-related financial records for Business Insurance claims
When documentation doesn’t support the loss, insurers cannot proceed with your insurance claims, which results in claim rejections. To avoid this, maintain a dedicated folder—digital or physical—for storing all insurance-related paperwork.
5. Not Paying Attention to Policy Exclusions
Every policy includes exclusion clauses that specify events or losses the insurer does not cover. Ignoring such exclusions is one of the most perilous insurance errors, as this makes the customers wrongly believe that “everything is covered”.
Common exclusions include:
• Wear and tear
• Intentional damage
• Loss due to negligence
• Losses incurred due to illegal activities
• Certain untreated medical conditions
• Unapproved modifications to an insured vehicle
• Some natural disasters (unless add-on covers are purchased)
In the event that your claim comes within an exclusion, it is automatically rejected. Always check exclusions, particularly when you are buying insurance to cover your business where fine-print exclusions can make a big difference in terms of coverage.
6. Ignoring Waiting Periods and Cooling-Off Periods
Many insurance plans have mandatory waiting periods.. These are common in:
• Health insurance (pre-existing diseases, maternity, OPD benefits)
• Specific personal accident benefits
• Some Business Insurance policies that cover specific risks
In case a claim is made before the waiting period is completed, the insurer will reject it regardless of the authenticity of the situation.
Likewise, cooling-off periods can be applied to new policies where some benefits are held up temporarily. Ignoring these timelines is a common insurance error that contributes to unnecessary claim rejections.
7. Failing to Disclose Pre-Existing Conditions/Risk Factors
To escape premium increases, many customers conceal medical complications, risky behaviors, smoking habits, or unsafe working conditions. Non-disclosure is, however, one of the worst errors made in insurance- which nearly ensures future claim rejections.
For example:
• Withholding information about diabetes or hypertension to a health insurer.
• Non-disclosure of smoking habits to a life insurance company.
• Unable to report hazardous materials managed by your business.
• Failing to report past accidents to the insurer.
Through medical reports, inspections, and investigations, the insurers can cross-check information in claims. In case of discrepancies, the claims can be rejected under the context of “material non-disclosure.”
8. Not Updating Policy Information Regularly
Life and business circumstances change. If your policy does not reflect these updates, it may cause claim rejections due to incorrect or outdated information.
You must update your policy when there are changes in:
• Address
• Occupation
• Vehicle modifications
• Annual revenue (for Business Insurance)
• Number of employees
• Health or lifestyle changes
• Business operations or risk profile
Not updating your insurance policy is one of the quietest yet costliest insurance mistakes, especially for entrepreneurs trying to protect your business.
9. Using an Expired or Lapsed Policy
An insurance policy works only when active. Many claims get rejected simply because the policy has expired or lapsed due to non-payment of premiums. This is one of the easiest insurance mistakes to avoid.
For instance:
• A motor insurance policy that lapses even by a day leaves your vehicle uninsured
• A business fire insurance policy that expires could leave your business exposed to massive losses
• A health policy that lapses means losing accumulated benefits like no-claim bonuses and waiting period credits
Always enable reminders or auto-pay options for premium renewals to avoid unnecessary claim rejections.
10. Violating Policy Terms and Conditions
Every insurance policy comes with specific conditions. Violating them—intentionally or unknowingly—often leads to straight claim rejections.
Examples include:
• Driving under the influence of alcohol
• Using a personal policy for commercial purposes
• Neglecting maintenance of insured property
• Running your business without required safety measures
• Not installing mandatory security devices required under Business Insurance
• Submitting fraudulent or exaggerated claims
Policy violations break the trust contract between the customer and the insurance company, making rejections unavoidable.
How to Avoid Claim Rejections: Best Practices to Follow
While these insurance mistakes are common, they can be avoided with a little awareness and proactive management. Here are some dependable ways to protect yourself and your business from common pitfalls:
• Read the entire policy, including exclusions and conditions
• Provide accurate and complete information at the time of purchase
• Inform the insurer immediately after an incident
• Maintain clear, complete documentation
• Renew policies before they expire
• Keep your insurer updated about any changes
• Seek guidance from licensed advisors to avoid procedural errors
By following these practices, your insurance claims have a much higher chance of approval.
Final Thoughts:
Insurance is a financial safety net—but only when used correctly. Even genuine claims may be denied if you make avoidable insurance mistakes, ignore policy conditions, or fail to submit proper documentation. These errors may seem small, but the consequences can be huge, especially for your business, where a single rejection could result in significant financial loss.
Understanding common pitfalls and staying proactive helps you avoid unnecessary claim rejections, ensures smoother claim processing, and helps you get the full benefits of your insurance coverage. Stay informed, stay compliant, and keep your policies updated to safeguard your personal and business finances.
At BimaKavach, we help you obtain reliable and customizable insurance solutions designed to safeguard your business from unexpected financial setbacks. We will help you obtain comprehensive coverage and absolute peace of mind- so that you can focus more on growth, while these policies handle the risks.
