With hundreds of thousands dead from the COVID-19 virus, it raises questions for many who have life insurance policies. Worries if designated beneficiaries will receive denials because of this infectious disease has consumers double-checking their policies and speaking with knowledgeable claim attorneys about their current coverage's exclusions. The reality is that the majority of payout requests will be approved for those who died of the disease, though there will be a few exceptions.
As a whole, the traditional life insurance companies have assured the public that deaths from COVID-19 will likely be covered. Despite this good news, there are exceptions to this promise. This includes already having contracted the disease before purchasing a policy or not sharing this information when applying. Previously suffering from the coronavirus is not an automatic barring from coverage, and typically, anyone that has a policy during the pandemic will remain protected.
However, there are additional provisions that could lead to a coronavirus-related claim denial:
The insured only had an accidental death and dismemberment policy (AD&D), which only covers accidents. Death related to infectious diseases like COVID-19 would not have coverage under such a plan. Typically, these policies are supplemental to a more traditional life insurance policy, and that coverage would payout for deaths related to this disease instead.
The application was not completely filled out or had inaccuracies on it regarding the insured. When submitting information to qualify for a life insurance policy, the applicant must be truthful. Purposely lying about age, weight, income, and even travel plans can be considered misrepresentations of fact since these details impact the premium cost and eligibility. Policyholders must understand that the first two years of their policy is a contestability period where the insurance carrier will review the policy application more extensively if the insured dies during that timeframe. This means that any purposeful, and sometimes accidental, untruthfulness can lead to policy cancellation and denial of much-need benefits to beneficiaries.
If insurance premiums are not current, the policy will lapse and give the insurance company grounds for denial if not reinstated prior to the insured's death. This is a troubling issue for those who die of COVID-19 because they are often incapacitated and have no way to make payments on their own. Most companies have a grace period of approximately 30 days and must send a notice of this fact along with a reminder that a monthly premium was not received. With the coronavirus causing difficulty for families to have contact with sick loved ones to take over living expenses, some states are demanding insurers extend this grace period further to accommodate. It is possible to apply for reinstatement, but this also renews the contestability period all over again.
Life insurance companies must follow through on all duties and actions related to a policy it has issued to a customer. This means that when a beneficiary files a claim, the carrier must live up to the standards set forth by not just its own policies but those of the governing state it operates within. From answering claim inquiries promptly to not unreasonably delaying a payout with just cause, insurers face a significant risk of punitive damages if they do not operate in good faith. Purposely causing harm to an insured or beneficiary’s right to death benefits is also known as bad faith practice and can result in a lawsuit that will cost the insurer even more money than the original amount owed.
Examples of bad faith practices could include:
Purposeful delay of payment
Intentionally looking for a cause to cancel a life insurance policy to avoid payout
Not responding to claim inquiries or filings to run down the time left in the state of limitations of its jurisdiction
Miscategorizing a cause of death to deny a claim
One of the more significant concerns regarding claim denials because of COVID-19 is a life claim getting denied because the policyholder engaged in actions, like smoking, that was not on the policy application and is associated with a higher mortality rate with the disease. This is why having a life insurance claim attorney representing the claim will help beneficiaries better navigate these complexities that can jeopardize payouts.
Every life insurance contract has a contestability provision to protect against fraudulent applications and intentional misrepresentation of the insured's personal information. That said, claims get paid out all the time during this period, which lasts from the first day the policy is effective till two years have passed. This protection gives the insurer rights to review the original application and verify that all the information on it was truthful and incomplete.
While it is essential always to submit accurate information when purchasing life insurance coverage, honest mistakes can happen, and policy providers will try to take advantage regardless.
Common errors that consumers make on their life insurance coverage include:
Forgets to mention the most minor of medical history incidents
Inaccurate address information or forgot to list one of them
Listed the wrong medication
Don’t share travel plans or hobbies that could pose a health risk
If you or a loved one recently lost a loved one to COVID-19 and concerned their life insurance policy will deny the claim, contact an experienced attorney in this field of law immediately. Not only will your legal counsel ensure that the claim gets filed correctly, but they can review the decedent’s application and policy ahead of time to put a strategy in place to avoid a denial of an owed death benefit. For those who already had their life insurance claim rejected, do not take this refusal as the final word on your case. Contact a lawyer right away to begin the appeals process.