Widow gets two million dollars after the life insurance company declared the policy to have lapsed when she and her husband failed to make a timely premium payment while he was dying in the hospital. The insured was a physician who had invested $350,000 in premiums in the policy (roughly $4,000 per month), in order to provide for his aging wife and their blind and disabled son. Because she did not receive the policy value, the widow actually ended up losing her home.
Read about life insurance lapse and read about life insurance beneficiary disputes
The agent notified the insurer in August that the insured was seriously ill. The December premium notice was purportedly mailed out, but the widow said she never received it. Shortly after her husband died in January, she noticed the oversight and sent in two payments that were rejected. The insurance company returned the payments, saying the policy was paid in full. Then it returned them and said it was not honoring the death claim. This life insurance company claimed that it sent multiple premium notices and would have accepted the late payments if the husband had not passed away.
Fortunately, with the help of a life insurance lawyer, the widow was paid, after a hard fight. In my opinion, in a case such as this, the insured should receive damages above the face value of the policy with interest, in order to provide just compensation and deter this type of conduct. This is especially warranted in this case where the insurance company was on notice that the insured was seriously ill. It could have reached out to the family to make sure that payments were timely made and the policy remained in force. Of course, it did not do so.
It is important to realize from this case that insureds frequently, when they are very ill and on their deathbeds, neglect to pay their premiums. An insured should investigate purchasing a policy rider that covers premiums in the event of a disability. It is also important to note that insurance companies regularly earn profits from this type of situation. It's not just a fluke that happens once in a while, but rather, life insurance companies know this is a significant source of revenue. Insureds will invest considerable sums in life insurance policies only to have their coverage lapse during their final days because they missed one premium payment. It is unfortunate that this occurs, and in my view a shameful way to consciously earn profits year after year, but it happens all the time.
A life insurance policy is designed to protect beneficiaries in the event of the death of the insured. It is of course known that insureds may be incapacitated prior to death and therefore may miss premium payments. You would think a feature that safeguards this from happening would be built into each and every policy, but unfortunately it is not. Our life insurance attorneys will get you the money to which you are entitled.
If your claim has been denied based on an alleged lapse of the policy for nonpayment of premiums, do not give up just yet. An experienced life insurance attorney can help you get the claim paid. Just like the insured must pay premiums in order to keep the policy active, the insurer must follow certain rules as well. First of all, insurance companies must generally notify an insured when a policy is at risk of lapsing due to nonpayment. Second, such notices must strictly comply with the policy terms and life insurance laws. Many laws require insurers to send premium-due notices by statute, as a provision in the insurance contract, or by course of dealing. Insurance contracts and life insurance laws usually provide for a grace period of thirty-one (31) days or more, which allows an insured to avoid cancellation of insurance coverage if premiums are paid within the specified time-frame. An insured must keep in mind that a lapsed policy may be reinstated even if lapsed, however, the reinstatement is not guaranteed and will trigger a new two-year contestability period.
Sometimes an insurance company mails a premium–due notice but fails to indicate that the policy is about to lapse. In other cases, a notice is mailed to the wrong address or it may be mailed too late. Often, an insurance company accepts premium payments well past the due date, giving the insured the impression that there is no need to always pay on time. Even in cases like this, a life insurance lawyer from our firm can help you recover the proceeds. The laws controlling lapse are complex and require experience and expertise. If your life insurance policy has lapsed for nonpayment, or if you are a beneficiary whose claim has been denied because a policy lapsed prior to the insured's death, call us now for help. Our firm has had success 100% of the time recovering delaying and denied insurance money.