Common Reasons Why Income Protection Claims Get Rejected

At a glance:

• Most claim rejections in income protection insurance are due to nondisclosure, exclusions, or missing evidence.
• Claims rely on medical proof, waiting periods, and policy terms.
• Disclose everything, keep records, and review your policy often for a better chance of getting insurance benefits.
• If rejected, request a review, seek help from a financial advisor or escalate to AFCA.

 

 

Income Protection insurance can be one of the best assets for individuals when and if they get in a situation where they are unable to work. It is a financial safety net that protects you temporarily during an illness or injury. Moreover, it is a vital safeguard that helps many Australians stay on top of their finances while focusing on recovery.

In most cases, claims are processed smoothly, especially when the policy has been carefully set up from the start.

That said, there are occasions when claims are delayed or, even worse, declined. This is often due to simple misunderstandings, overlooked details, or missed requirements. The encouraging news is that these issues are very common and almost always preventable.

In this blog, we will cover common reasons why income protection claims get rejected.

 

 

How Income Protection Insurance Works in Australia

 

Under an income protection insurance policy, the insured can enjoy the benefits as regular funds during a certain period when they are not able to work because of short-term sickness or injuries. This insurance provides funds to replace around 70% of your earnings during recovery time, so people remain financially stable through their health situations.

However, if you choose a reliable insurer like Aspect Underwriting, you can protect up to 85% of your income, which is significantly higher than the market average.

There are some thresholds that need to be met when making an insurance claim. The assessment includes:

• Medical evidence and diagnosis confirming your inability to work
• Whether you meet the policy’s definition of disability
• A waiting period, which could range from 14 to 90 days
• Compliance with the terms and conditions as outlined in your Product Disclosure Statement (PDS)

 

 

Reasons Why Income Protection Claims Get Rejected

 

Let us cover some of the common reasons why your income protection claims might be rejected and, more importantly, how to avoid them.

 

Non-Disclosure of Medical History

 

First, failure to provide full information during the application phase leads to the most common denial of insurance claims. Your claim may face denial from the insurer when you fail to reveal existing illnesses or ongoing medical conditions at the time of application, regardless of how minor those conditions seemed at that moment.

For instance, if a person who acquired an income protection policy five years back failed to reveal his persistent back pain when he made his initial application. The insurer can deny future compensation claims after spotting the pre-existing medical issue in his records, even if the spinal injury results in a subsequent claim.

Pro Tip: Provide a full and honest disclosure about your medical background, regardless of medical examination requirements.

 

Claiming for an Excluded Condition

 

Next, the policy coverage denies any benefits when you file a claim for conditions that fall under exclusion terms. Some illnesses, injuries or situations may not be covered. The policy usually does not pay benefits for pre-existing medical issues. Some mental health disorders prevent policyholders from filing insurance claims. Your claim may also be rejected for injuries sustained through intentional or high-risk behaviour.

The claim approval process depends on specific criteria set by your insurance provider, which may differ among insurers. For example, if a part-time freelancer had a standard policy that required full-time employment at the time of claim, but they were unaware of this condition and filed for benefits after a condition like surgery, they would be unable to claim benefits.

Pro Tip: Read the policy terms carefully to determine what’s included and what’s not.

 

Not Meeting the Definition of ‘Unable to Work’

 

Your disability benefits require your health condition to fulfil the insurer-defined standards of either total disability or partial disability. Your ability to perform light tasks or work part-time may result in benefit denial, depending on the specific policy you have selected.

Pro Tip: Understand how your policy defines disability and what proof is required.

 

Insufficient Medical Evidence

 

Successful claims need complete documentation of supporting evidence. Your claim faces potential problems when your doctor provides weak descriptions in their report, fails to explain medical events, or you waited too long to seek medical care after your injury.

Pro Tip: Provide detailed medical records, specialist reports, and evidence of ongoing treatment.

 

Waiting Period Not Met

 

Each income protection policy requires clients to wait a specific time before claiming and receiving benefit payments, which is called the waiting period. The waiting period typically ranges from 14 to 90 days. For you to be eligible to file a claim, you must be unable to work for the waiting time you’ve chosen.

For instance, if your waiting period is 14 days, you have to wait for 14 days from the day you’re unable to work to be able to receive the benefits. If you’re able to resume work in 10 days, your income protection claim will be rejected.

Pro Tip: Consider your waiting period before filing the claim.

 

Employment Status Not Covered

 

If you do not meet the work hour criteria at the time of the claim, there’s a high chance that your claim will be declined. For example, if you have an income protection insurance policy for a full-time employment status, you should be employed full-time during the time of injury and claim. Part-time employees, casual workers, and self-employed individuals may require customised policies to obtain insurance coverage.

Pro Tip: Check that your policy indicates your genuine employment status precisely at the time of application and claim.

 

Failure to Follow Treatment Plans

 

Your health insurance claim may become invalid when you refuse to follow medical recommendations, which include rehabilitation and therapy. Not following medical advice may seem like non-compliance, which can void benefits.

Pro Tip: Follow all medical recommendations provided by your doctor and maintain detailed records of your treatments and appointments.

 

 

How to Avoid Having Your Income Protection Claim Denied

 

Here are a few tips that can help you overcome any issues related to your income protection claim in the most common scenarios.

Be transparent when applying, and fully disclose any existing conditions. If you hide them while registering for the insurance, you will likely not be redeemed.

Review your policy regularly to ensure it matches your current situation. For example, you might be considering a job change or have health-related issues. In such cases, it’s important to inform the insurer and make the necessary updates.

Keep documentation of income, diagnosis, and medical treatment, as the inability to provide every detail and document will lead to the rejection of the insurance claim.

If you fulfil all the criteria and your insurance is still being rejected, seek advice from a licensed insurance broker or financial adviser.

 

 

What to Do If Your Income Protection Claim Is Rejected

 

Don’t panic. If your claim is rejected, there are steps you can take to seek a fair outcome:

• Request the rejection reasons in writing.
• Ask for an internal review of the decision.
• If unresolved, escalate the matter to the Australian Financial Complaints Authority (AFCA)
• In complex cases, consider speaking with a lawyer or financial adviser.

 

Income protection insurance functions as a crucial shield to protect financial stability when health issues disrupt income. Any rejected claims can come from avoidable causes such as missing paperwork, policy misunderstandings, and non-disclosure.

If you have any questions about income protection insurance policies or you’re planning on getting one to stay financially secure in case of any unforeseen circumstances, don’t hesitate to contact Mike at Aspect Underwriting. Stay protected during hard times!