Nothing can replace the loss of a loved one. However, insurance policies provide some comfort in that those left behind will have continuing financial stability, mainly if the deceased is the primary breadwinner.
Whether money is needed for a funeral or more long-term needs, life insurance can help fill the gap. Historically, most claims are paid. The American Council of Life Insurers cited fewer than 0.5 percent of claims disputed in 2019.
Tragic outcomes during equally tragic times
Denied claims do happen due to the following:
Failing to disclose medical conditions/risk factors – Life expectancy is the foundation. Applying for life insurance requires you to disclose medical conditions and other risk factors. Even dangerous hobbies that put your life in peril. Leaving out that pertinent information could result in a claim denial following a tragic death.
Unpaid premiums – Beneficiaries who pursue claims sometimes get the shocking news that payments were not exactly timely. Options do exist for policyholders, depending on the number of delinquent installments. Passing away within the grace period will keep the policy but with a penalty of the past-due-premium cost. Reinstating a policy that lapsed can occur by paying the past due amount with interest.
Living too long – With term life insurance, it is possible that you could outlive the term of the policy without a death benefit payout. Additional coverage to renew the insurance may come at a higher price. Other options include converting term insurance into a permanent policy. Adhering to the “window of opportunity” is paramount.
Suicide: Most policies have a suicide clause over two years where a payout won’t occur if the policyholder ends their life. Beneficiaries can still benefit from the refund in premiums.
A claims denial is not always the final verdict. Regardless of the circumstances, options exist to secure what many consider to be much-needed financial resources following a tragic event.