Life Insurance Claim Denied? Here’s Why … And What to Do Next
If you have a life insurance policy on yourself or your spouse, you probably feel very comfortable about the smart planning you’ve done for the future. But did you know that life insurance claims can be denied by the insurance company?
The case study below shows how a life insurance claim can be denied, how it can be disastrous to your survivors and what to do if your life insurance claim has been denied.
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Life Insurance Claim Denied – A Case Study
Lydia was devastated after the sudden and unexpected death of her husband, Jack. After 36 years of marriage, she was unsure how she was going to cope without him; emotionally and financially.
As the primary breadwinner of the home, Jack’s income was key to the couple’s future stability. Lydia was now dependent on the life insurance that they carried on Jack and so it came as a horrifying surprise when the insurance company denied the claim.
According to the adjustor, Jack lied about an underlying health issue on his application and therefore voided his own policy. This was especially surprising considering that Jack died in a boating accident. The cause of death was listed as accidental drowning.
To most of us, this life insurance claim denial makes no sense at all. Though Lydia’s case is unusual, it is not unheard of. Unfortunately, the insurer acted completely within its rights.
If an insurance carrier deems that the insured violated the terms of the policy, in any way or manner, it can legally pay the beneficiaries nothing.
The most common reasons for life insurance claim denials are:
- The death occurred during the contestability period. This is usually two years with most life insurance policies. The contestability period gives the insurer an “out” in terms of having to pay on what would be a fairly new policy. This two-year period is also often used by the insurance company to investigate the claimant’s information. They will try to determine if the background, health and personal information that was provided was true and correct. The company can use any misinformation – intentional or not – to deny the claim.
- The policy doesn’t cover the cause of death. Activities that carry a high risk of death are often excluded from beneficiary claims for benefits. If a spouse dies while scuba diving or base jumping it is not likely that the surviving partner will see any insurance payouts. Many insurance companies also see death by suicide as a reason to deny claims.
- A claimant’s failure to disclose pertinent information. Those who lie about their health history, criminal investigations or a history of drug or alcohol abuse, are often leaving the surviving members of their family vulnerable to benefit denial. It is critical that you are upfront and honest when filling out life insurance forms. It would also be a good idea to get in writing any statements made to you by your insurance agent. In order to advance a sale, certain agents may cut corners and just blaze through the application process. If you filled out an application under the guidance of an insurance agent and feel like you were rushed, you need to challenge the insurance company.
- A failure to pay the life insurance premiums. As with any service, not paying for it in a timely manner usually results in the cancellation of the service; the same goes for insurance benefits. Though most policies are backed by a 30-day grace period, most insurers will void the policy if they are unable to collect the premiums after a certain period of time.
What to Do When a Life Insurance Claim is Denied
If you feel have had a life insurance claim denied, the first thing to do is contact the insurer and ask them to clearly spell out the reason for the denial.
Next, contact a lawyer who specializes in insurance benefit denials as soon as possible. At ERISA Law Center, we are nationally recognized for fighting insurance companies, winning claims for our clients and getting them the benefits that they deserve.