Reasons Why Car Insurance Claims Get Rejected (And How to Avoid It in Pakistan)

Introduction: The Real Problem Most Drivers Face

Imagine this…

You’ve just had a minor accident on Shahrah-e-Faisal during rush hour. Your bumper is damaged, headlights broken, and maybe the side door is scratched too. Thankfully, you’ve been paying for comprehensive car insurance every year — thinking that if something ever happened, your insurer would step in and cover the loss.

But when you submit your claim, it gets rejected.

Suddenly, all those years of paying premiums feel pointless.

This is the reality many car owners in Pakistan face today. A large number of insurance claims are denied not because insurance companies are “scamming” people — but because policyholders unknowingly violate terms and conditions written deep inside their insurance agreements.

Most drivers never read the fine print.

From delayed claim reporting to unauthorized drivers using the vehicle, even a small mistake can result in claim rejection. Understanding how comprehensive car insurance works — and why claims are rejected — can save you from financial loss that could run into lakhs of rupees.

Let’s break it down in simple terms.

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How Comprehensive Car Insurance Works

Comprehensive car insurance is designed to protect vehicle owners from financial loss caused by accidents, theft, fire, natural disasters, vandalism, and third-party liability.

Unlike basic third-party insurance (which only covers damage caused to others), comprehensive insurance includes:

• Damage to your own vehicle
• Third-party property damage
• Medical expenses (depending on policy)
• Theft or total loss
• Fire damage
• Flood or natural disaster damage
• Riot or vandalism-related losses

Here’s how it works:

You pay an annual premium to an insurance company. In exchange, the insurer agrees to compensate you financially if your vehicle is damaged due to a covered event — provided you follow the terms outlined in your policy.

If you meet an accident or your car is stolen:

1. You inform the insurance company immediately.
2. The insurer assigns a surveyor.
3. The damage is assessed.
4. Claim is approved or rejected based on policy compliance.

However, claims are often rejected due to:

• Driving without a valid license
• Using the car for commercial purposes when insured privately
• Late claim reporting
• Non-disclosure of previous accidents
• Vehicle modifications not declared

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Who Should Buy It?

Comprehensive car insurance is ideal for:

• New car owners
• People who live in high-traffic cities like Karachi or Lahore
• Drivers who park their vehicles outdoors
• People using financed or leased cars
• Owners of high-value vehicles
• Individuals who drive long distances daily
• Those living in flood-prone areas

If your vehicle is less than 5–7 years old, comprehensive insurance is highly recommended because repair costs can be significant.

Even a small collision can cost:

• Bumper repair: PKR 15,000 – 40,000
• Headlight replacement: PKR 20,000 – 60,000
• Door repainting: PKR 10,000 – 25,000

Without insurance, these expenses come directly from your pocket.

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Benefits

Some of the major benefits include:

Financial Protection

Insurance helps cover repair or replacement costs that could otherwise become a financial burden.

Peace of Mind

You can drive confidently knowing you are protected from unexpected losses.

Theft Coverage

If your car is stolen, the insurer compensates you based on the insured declared value (IDV).

Natural Disaster Protection

Covers damage caused by floods, earthquakes, storms, and fire.

Third-Party Liability

Protects you from legal and financial responsibility if your vehicle damages someone else’s property.

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Limitations

Despite its advantages, comprehensive insurance has some limitations:

• Wear and tear damage is not covered
• Mechanical breakdown is excluded
• Claims during intoxicated driving are rejected
• Damage outside geographical coverage is not accepted
• Unauthorized driver accidents are not covered
• Using the vehicle for ride-hailing services without declaring it can void claims

Always remember: Insurance covers sudden and accidental loss — not negligence.

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Estimated Cost in Pakistan

Car insurance premiums in Pakistan usually range between:

Car Value	Estimated Annual Premium
PKR 10 Lakh	PKR 18,000 – 25,000
PKR 15 Lakh	PKR 25,000 – 35,000
PKR 20 Lakh	PKR 35,000 – 50,000
PKR 30 Lakh	PKR 55,000 – 75,000

Premium depends on:

• Vehicle make & model
• Engine capacity
• Year of manufacture
• City of registration
• Driving history
• Claim history

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Factors That Affect Premium

Several factors determine how much premium you will pay:

• Driver’s age
• Driving experience
• Vehicle usage
• Claim history
• Type of coverage
• Installed security features
• Location risk level
• Deductible amount selected

If you’ve made multiple claims previously, your premium may increase during renewal.

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Real Example Scenario

Ali owns a 2021 Toyota Corolla insured for PKR 28 lakh under a comprehensive policy.

One day, his cousin borrows the car and meets with an accident.

Ali files a claim expecting full coverage.

But the claim gets rejected.

Why?

Because the cousin was not listed as an authorized driver in the insurance policy.

Repair cost:

• Front bumper: PKR 35,000
• Headlights: PKR 45,000
• Bonnet denting & painting: PKR 30,000

Total loss:

PKR 1,10,000 paid from Ali’s own pocket.

A simple policy detail caused a huge financial setback.

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Tips Before Buying

Before purchasing comprehensive insurance:

• Always read policy terms carefully
• Declare vehicle modifications honestly
• Ensure authorized drivers are listed
• Understand deductible clauses
• Check claim settlement ratio
• Compare multiple insurers
• Confirm geographical coverage
• Avoid delayed claim reporting

Even saving PKR 5,000 on premium is not worth a rejected claim later.

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FAQs

Why do insurance companies reject claims?

Usually due to policy violations such as unauthorized drivers, intoxication, or delayed reporting.

Is late claim reporting a problem?

Yes. Most insurers require reporting within 24–48 hours.

Are mechanical failures covered?

No. Insurance only covers accidental damage.

Can I drive without adding another driver to the policy?

Only listed drivers are typically covered.

Does comprehensive insurance cover flood damage?

Yes — if natural disasters are included in your policy.

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Conclusion

Car insurance is meant to protect you financially — but only when you follow policy rules.

Many claim rejections happen not because insurance companies are unfair, but because policyholders unintentionally violate conditions they never fully understood.

Reading your insurance policy, understanding exclusions, and maintaining transparency with your insurer can make the difference between a successful claim and a rejected one.

A few minutes spent reviewing your coverage today can save you lakhs of rupees tomorrow.

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Author Bio

Ahmad Raza is an automotive insurance researcher and financial content writer with over 5 years of experience analyzing vehicle insurance policies in Pakistan. His work focuses on simplifying complex financial products into practical guidance for everyday drivers.

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Sources / References

Adamjee Insurance Motor Coverage Guide

Securities and Exchange Commission of Pakistan (SECP)

State Bank of Pakistan Insurance Guidelines

Pakistan Insurance Association Reports

Jubilee General Insurance Policy Documents

EFU General Insurance Motor Policy Terms