What would happen to your immediate family (spouse, children, etc.) if you were to pass away? It is not something that anybody wants to think about, but the fact remains that it's always a good idea to plan for worse-case scenarios in life. As such, taking out a life insurance policy is often a wise decision. After all, with a sound life insurance policy, you can hope that your loved ones will be taken care of financially in the event of your passing. With the proper coverage, your mortgage will be paid off, your funeral expenses will be covered, and your spouse and/or children will have received the payout they need to more-or-less continue their existing lifestyle.
Unfortunately, life insurance expectations versus reality don't always line up as well as you'd hope. In fact, there are several mistakes that you could make when it comes to your life insurance policy that could result in life insurance claim denials for your beneficiaries down the road.
Being Dishonest on Your Application
Sure, your life insurance premiums are largely determined by how large of a "risk" your insurance company considers you to be. It makes sense, then, that a heavy smoker with a history of health problems will pay higher life insurance premiums than an active non-smoker who has never had a major health problem in his or her life.
So while it may be tempting to report that you're a non-smoker and in excellent health on your application in order to pay a lower premium, it's important to realize that these little "fibs" could have major consequences down-the-road. All it takes is your insurance company finding out about one discrepancy in your application after your death to consider your coverage void and deny your loved one's death benefits claims.
Drug and Alcohol Use
There are also circumstances in which drug and alcohol use can result in a denied claim after your passing. This includes both illegal street drugs and prescription medication that you don't have a prescription for in your name. Furthermore, many life insurance policies these days have specific exclusions for illegal activities, such as felonies and even misdemeanors. Therefore, if you pass away as a result of a car accident and a toxicology report shows that you were above the legal alcohol limit while driving or that you had other illegal drugs in your system, then there is a good chance that the life insurance claim will be denied, and no payouts will be made to your beneficiaries.
Another clause that most life insurance companies include these days is one that states that death benefits will not be paid out in the event of a death caused by suicide or other self-inflicted injuries. Specific terms and conditions in regards to this exclusion can vary from one insurance company to the next, but it's still important to keep in mind when purchasing a life insurance policy.
Loss of Employment
Finally, if you have life insurance coverage through your employer and you lose your job, be sure to purchase your own private life insurance policy right away, as it is unlikely that your coverage will carry over.
By avoiding these common life insurance mistakes, you can protect your family down the road and also prevent them from the emotional and financial hardship of facing a denied life insurance death benefits claim.
Our life insurance lawyers handle both delayed, and denied life insurance claims. When choosing a life insurance lawyer, make sure that the lawyer has at least fifteen years of experience if you want a shot at collecting the benefits.