In a previous blog article, we explained some of the high level details of a key person insurance policy and quickly hit on the claims process. As a law office that represents many clients having been unfortunately informed that their insurance claims are being denied, we felt it valuable to post a follow up article discussing many of the reasons key man insurance claims get denied. In addition, presenting options for people that have been denied and seek to fight the insurance provider’s determination on a claim. Whether you hold a key man insurance policy as a business, shareholder or loan holder, there are various reasons why you should fight a claim denial.
Key Life Insurance
For any readers that have not read the aforementioned post, key life insurance is a type of insurance policy used to protect the interests of parties reliant on a key individual that produces profits for a business. Imagine an elite executive, famous representative or uniquely skilled employee of a business. Now imagine if that person were to die or be severely injured and can no longer work. The business that relies on their skills or production would suffer greatly, so much to the extent of maybe going out of business. A key man policy is put in place for just this type of incident in hopes of lessening the financial damage experienced. The risk of holding such a policy is that it is still up to the insurance provider to make a determination on any claims filed against the policy. Receiving the news that your claim has been denied may put you firmly back at square one.
Reasons for Denial
There are a number of reasons that an insurance provider might return a decision of ‘denied’ on a claim for a key life insurance policy. The most common reasons for such a determination are: fraud, breach of policy, contestability of claim and policy exclusions.
Fraud is usually associated with the death or injury of the key person. The provider would reject such a claim in the event that foul play was involved in the death or if the injury was planned. Another case for this might occur if the injury is not the level of requiring a payout. Breach of policy and policy exclusions being the reason for a denied claim are mostly reliant on the contract language. If the parties involved are not careful about complying with the policy documents, they might find themselves in a bad spot down the road when they actually need the payout. Finally, a contestable claim exists when a claim is filed fairly soon after applying for such a policy. Generally this will kick in if the claim is filed when the policy is in place for a period of 2 years or less. If such an event occurs so close to policy receipt, the insurance provide will often research the matter thoroughly to see if there was any misrepresentation involved. Get a firm of life insurance lawyers to evaluate your claim.