Common Reasons Why Income Protection Claims Get Rejected

At a glance:

• The causes of income protection claim rejection include non-disclosure, policy exclusions, failure to meet disability definitions, insufficient medical evidence or unmet waiting periods.
• Employment status and compliance with prescribed treatment plans can also affect claim eligibility.
• Reviewing policy terms, maintaining accurate records and understanding claim requirements can reduce the risk of issues at claim time.

 

Income protection insurance can be a valuable financial protection if you become unable to work due to illness or injury. It provides a temporary financial safety net, replacing part of your income so individuals can focus on recovery while meeting essential financial commitments. When a policy is set up accurately and managed correctly, most income protection claims are accepted without issue.

However, some income protection claims are delayed or denied, typically due to avoidable technical or administrative issues, such as issues linked to disclosure or eligibility under the policy.

This article outlines common reasons why income protection claims get rejected and what affects claim outcomes.

 

 

How Income Protection Insurance Works in Australia

 

Income protection insurance provides regular income payments if illness or injury prevents you from working. Instead of a lump sum, benefits are paid monthly to replace a portion of your income while you are unable to earn your usual wages.

Most income protection policies in Australia replace around 70% of pre-disability income, depending on the benefit period and policy terms. Some insurers, such as Aspect Underwriting, offer policies that may provide up to 85% income coverage if eligibility requirements are met.

When an income protection claim is lodged, it is assessed against the policy’s contractual requirements. This assessment is based on:

• Medical evidence and diagnosis confirming your inability to work.
• Policy definitions and conditions, including whether you meet the definition of disability.
• Waiting periods, which must be fully served before benefits are payable.
• The Product Disclosure Statement (PDS) that governs coverage, exclusions and claim obligations.

The PDS establishes the criteria for assessing eligibility throughout the claims process.

 

 

Top Reasons Why Income Protection Claims Get Rejected

 

Income protection claims are assessed strictly in accordance with the policy terms. In most cases, claims are rejected due to disclosure issues, eligibility requirements or documentation gaps, rather than issues with the claim itself.

 

Non-Disclosure of Medical History

Failure to disclose pre-existing medical conditions at the time of application is one of the most common reasons income protection claims are rejected. This applies even where conditions were considered minor at the time or where no medical examinations were required.

Non-disclosure can affect a claim if medical records identify an undisclosed condition that is relevant to the claim. Insurers assess claims based on the accuracy of information provided at the time of application, not on how long the policy has been in place.

Full and accurate disclosure of medical history is required, regardless of perceived severity.

 

Claiming for an Excluded Condition

Income protection policies contain exclusions that limit when benefits are payable. Claims may be rejected if the condition falls within an exclusion clause, such as pre-existing conditions or other excluded illnesses and injuries.

Coverage and exclusions vary by policy, making it essential to understand what is not covered. These exclusions are outlined in the Product Disclosure Statement (PDS), which governs claim eligibility. Reviewing exclusions in the PDS helps prevent claims for conditions not covered from being lodged.

 

Not Meeting the Definition of ‘Unable to Work’

Eligibility for income protection benefits depends on whether you meet the policy’s definition of total or partial disability. These definitions differ between policies and determine whether benefits are payable or reduced.

In some cases, returning to part-time work or performing light duties may affect eligibility for full benefits, depending on how disability is defined in the policy.

 

Insufficient Medical Evidence

Income protection claims rely heavily on medical evidence. Claims may be delayed or rejected where medical reports are incomplete, unclear or do not clearly explain how the condition affects your ability to work.

Gaps between injury, diagnosis and treatment can also affect assessment outcomes. Ongoing medical documentation is often required during the claim period.

Clear, consistent and ongoing medical evidence supports the claim assessment.

 

Waiting Period Not Met

All income protection policies include a waiting period, which is typically 9 to 14 days. The period must be completed before benefits are payable. The insurance provider may reject your claim if you return to work before the waiting period ends.

Misunderstanding when the waiting period starts or assuming partial incapacity is insufficient can also lead to issues at claim time.

Benefits are payable only after the full waiting period has been completed.

 

Employment Status Not Covered

Claims may be declined if employment status at the time of claim does not meet policy requirements. Policies often specify minimum work hours and employment types, such as full-time, part-time, casual or self-employed.

A mismatch between the employment status declared at the application and the actual circumstances at the time of the claim can affect eligibility.

Employment details must accurately reflect the employment arrangements at both the application and the claim.

 

Failure to Follow Treatment Plans

Income protection benefits generally require compliance with prescribed medical treatment or rehabilitation plans. Claims may be affected if treatment is declined or not followed without medical justification.

Insurers may view non-compliance as affecting recovery and ongoing eligibility, particularly where treatment participation is a condition of continued benefits.

Following and documenting medical treatment supports ongoing eligibility for the claim.

 

 

Examples of Claim Rejection Scenarios

 

The following hypothetical examples illustrate how income protection claims may be rejected due to common oversights, even when the policy has been held for several years.

• Non-disclosure identified at claim time: A claim is lodged for a back injury, but medical records reveal a pre-existing condition that was not disclosed at the time of application. The non-disclosure affects eligibility, resulting in the income protection claim being declined.
• Waiting period misunderstanding: A claim is submitted before the full waiting period has elapsed. Because the policy’s waiting period (e.g. 30 days) was not fully served, benefits are not payable.
• Employment status not meeting policy conditions: At the time of the claim, you no longer met the minimum work hours required under your income protection policy, which was structured for full-time employment, resulting in the claim being rejected.

 

 

How to Reduce the Risk of a Claim Being Denied

 

While income protection claims are assessed strictly in accordance with the policy terms, many issues can be mitigated through careful preparation and ongoing policy management. Key steps include:

• Accurate and complete disclosure at application: Provide full and honest information about medical history, employment and income when applying for income protection insurance. Incomplete or inaccurate disclosure remains a common cause of claim rejection.
• Regular review of policy terms as circumstances change: Changes to employment status, income structure or health should be reviewed against your policy to ensure cover continues to meet eligibility requirements.
• Maintaining clear income and medical records: Keep income and medical diagnoses documents, with records of treatment plans and ongoing care to support income protection claim assessment and reduce delays.
• Seeking professional advice when unsure: If policy wording or eligibility requirements are unclear, advice from a licensed insurer or financial adviser can help address potential issues before a claim is lodged.

For a more detailed explanation of eligibility requirements and the claims process, see this guide on what needs to happen for an income protection claim to be accepted.

 

 

What to Do If Your Income Protection Claim Is Rejected

 

If your income protection claim is rejected, you can take these clear steps to seek clarification and review the decision.

• Request the rejection reasons in writing: Ask the insurer to provide written reasons outlining why the income protection claim was declined. This helps clarify whether the decision relates to policy definitions, exclusions, medical evidence or eligibility requirements.
• Ask for an internal review of the decision: Most insurers have an internal dispute resolution process that allows the claim to be reassessed based on additional information or clarification.
• Appeal a denied income protection claim: If you believe the decision does not align with the policy terms, you may be able to appeal. This guide explains when and how to appeal an income protection denied claim and what information is typically required during the process.
• Escalate the matter if unresolved: If the issue remains unresolved after internal review, you can escalate the complaint to the Australian Financial Complaints Authority (AFCA), which provides independent dispute resolution for insurance matters.
• Obtain legal or financial advice for complex disputes: In cases involving disputed definitions, exclusions or medical assessments, independent legal or financial advice may help clarify available options.

The claims review and dispute process can involve multiple stages. For a detailed explanation, refer to this guide on what to do if your income protection claim is rejected, which outlines review options, appeal pathways and escalation steps.

 

Income protection claims are assessed strictly in accordance with the policy terms, medical evidence and eligibility requirements. While claim rejections can occur, they are often linked to avoidable issues such as non-disclosure, misunderstandings around definitions or gaps in documentation, rather than the claim being invalid.

Understanding how income protection insurance works, carefully reviewing the policy and maintaining accurate records can significantly reduce the risk of issues at claim time. A considered approach before a claim arises helps support clearer assessments and smoother outcomes if income protection is ever needed.

For further insights into income protection cover, claims assessment and common policy considerations, explore the income protection resources available through Aspect Underwriting.

 

 

FAQs

 

Does returning to work part-time affect a claim?

It can. Many income protection policies distinguish between total disability and partial disability. Returning to work part-time or performing light duties may reduce benefit payments or shift the claim from total to partial disability, depending on the policy terms. In some cases, working at all may affect eligibility for full benefits, so policy definitions are critical.

 

What happens if my medical condition changes after approval?

If your medical condition improves or changes, insurers may reassess your claim to determine whether you still meet the policy’s definition of disability. Income protection benefits are typically paid as long as the eligibility criteria are met. This means ongoing medical evidence and updates are often required throughout the claim period.

 

Can I dispute a rejected income protection claim?

Yes. If a claim is rejected, you can request the reasons in writing and ask for an internal review by the insurer. If the matter remains unresolved, you can escalate the complaint to the Australian Financial Complaints Authority (AFCA). For complex disputes, seeking independent legal or financial advice may also be appropriate.