A life insurance policy is a contract between the insured and the insurance company that is intended to provide for the payment of life insurance benefits to family members or friends in the event of the policy holder's death. The main benefit of this type of insurance is that it gives the insured a certain assurance that when they die, their family will not experience financial hardship because of it. These funds are often intended to replace a loved one's income when he dies, or the value of the services of that loved one to the household. However, after the policy holder dies, life insurance claim denials are not only possible, they are common business practices of insurance companies.
When a life insurance claim is filed, the life insurance company will review both the life insurance claim and the policy itself. During this review, the life insurance company will look for possible reasons that can be used to deny the life insurance claim in a tactic known as life insurance rescission – the life insurance company declares the insurance contract cancelled, and refuses to pay any life insurance claims.
An insurance company may be entitled to deny a life insurance claim if it can show that the applicant made a material misrepresentation during the application process. Life insurance companies looking to deny claims may try to argue that a misrepresentation has been made. A misrepresentation in an application for insurance can be a false statement concerning a past or present fact, made to the insurer by the insured.
There are constraints to a life insurance company, as these incontestability clauses prevent a challenge after 2 years.
A court recently found that a insurance company had wrongfully cancelled the life insurance policy based on the representations in the application for coverage, and stated that the life insurance company was required to investigate, within the two-year contestability period, the accuracy of the information found in the life insurance application. According to the Court, the life insurance company's failure to verify the information found in the application within two years barred the life insurance company from denying claims. If you have lost a loved one and the life insurance company has denied your life insurance claim, your ability to recover life insurance benefits might not be lost. Please call our law firm for a free, confidential consultation. We are a team of legal experts in life insurance law and have recovered millions of dollars for our clients whose life insurance claims have been denied.