Debit Card Insurance Claims Denied for ATM Use; Only Purchases Count, Say Experts

Lack of Awareness About Transaction Rules Leads to Rejected Claims

New Delhi – Many debit card users in India are unknowingly losing out on complimentary insurance benefits due to a little-known rule: ATM withdrawals and UPI payments do not qualify as eligible transactions to keep the accidental death cover active.

According to experts, banks and insurers require a purchase transaction—either a card swipe at a store or an online payment—within 30 to 90 days before an incident for the insurance to remain valid. This means simply using a debit card to withdraw cash or pay via UPI is not enough.

This condition often comes to light only after a claim is rejected. “People assume that any kind of card usage is acceptable,” said Shilpa Arora, Co-founder and COO of Insurance Samadhan. “Unfortunately, that’s not the case, and banks rarely inform users about these fine-print rules.”

Banks also do not issue a Certificate of Insurance (COI) in most cases, nor do they explain the terms clearly when the card is handed over. As a result, users wrongly believe that active card usage equals active insurance coverage.

Check for Qualifying Transactions

If a policyholder passes away, the family can file for review only if the cardholder made a qualifying debit card purchase within the required period. Transaction records must be provided as proof.

“If no eligible purchase was made within that timeframe, the insurance claim will likely be denied,” Arora said.

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Reviving Lapsed Life Insurance Better Than Buying New Policy, Say Experts

Insurance experts also advise that reviving a lapsed life insurance policy is generally a smarter choice than buying a new one, provided it’s still within the five-year revival window.

Revival helps policyholders retain:

• The original premium amount
• The same sum assured
• Any bonuses accrued before the lapse

“Restarting your existing policy is often more economical and practical,” Arora said. “You keep your benefits, and there’s continuity in your long-term financial planning.”

However, insurers may require a health declaration and possibly medical tests, especially if a long time has passed or the person’s health has changed.

On the flip side, buying a new policy can result in:

• Higher premiums
• Loss of previous benefits
• New health-related exclusions

Experts recommend policyholders revive their existing coverage unless it no longer suits their financial goals.