Filling out a life insurance application is more tedious than intimidating for most people, but it pays to take it seriously. The number one reason life insurance claims are denied is that the insurance company claims the policyholder made a “material misstatement” during the application process.
Because the insurance company uses information in the application to determine the applicant’s eligibility for insurance and premiums, a material misrepresentation may allow the insurance company to cancel the contract. In that event, premiums would be returned, but no benefits would be paid.
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Some of the most common misrepresentations people make on life insurance applications include:
- Denying or understating tobacco use
- Denying or understating drug use, past or present
- Leaving out mental health history, such as depression
- Leaving out family history, especially of cancer
When an insurance company discovers these misrepresentations after the insured’s death, the company may attempt to avoid coverage. This is most likely to occur during the first two years after the policy is issued, as the insurance company has the right to review medical information and contest the validity of the contract during that time.
However, not all life insurance claim denials citing material misstatement involve significant medical issues. In some cases, though the insurance company deems the lie, error, or omission “material,” it is in fact a small detail that would not have impacted the insured’s eligibility for coverage, nor even raised his or her premiums.
The Insurance Company Doesn’t Have the Final Say
Every case is different; there’s no simple rule that will allow you to determine whether a misrepresentation is material. The one thing you should bear in mind, though, is that the fact that an insurance company has labeled something a material misstatement doesn’t make it so.
If you’ve received a denial notice or a notice of cancellation based on material misstatement, you should speak with an attorney experienced in life insurance claim denial cases as soon as possible.
Other Common Reasons for Denial of Life Insurance Claims
A life insurance claim may be denied for many reasons. Some of the most common reasons are:
- The cause of death was suicide and the policy had been in force for less than one year
- The cause of death was otherwise excluded, as in a death from illness under an Accidental Death and Dismemberment (AD&D) policy
- The policy lapsed due to non-payment before the insured’s death
Some denials are clear-cut. For example, an AD&D policy will deny a claim if the insured died of pneumonia. But, often the determination is a judgment call. When cause of death is uncertain, the classification of a misstatement as material is questionable or a policy term is open to interpretation, the beneficiary may be entitled to receive the value of the policy, despite the insurance company’s denial notice.
When there are open questions, or you are unsure as to whether there may be contestable issues underlying the denial, don’t simply accept the insurance company’s determination. Seek the advice of an attorney experienced in handling life insurance claim denial cases right away.
Be Prepared to Fight for Your Life Insurance Benefits
When a loved one named you the beneficiary of his life insurance policy, that person intended to provide for you when he was no longer with you. An insurance company that denies a valid life insurance claim thwarts that effort, though the insured may have paid premiums for many years to ensure that you were protected after his death.
You don’t have to let an insurance company cheat you or cheat your lost loved one. Fighting for your right to recover life insurance benefits involves two critical steps. First, decide that you are not going to accept the insurance company’s summary denial and move on. You must be prepared to challenge the decision. Second, connect with an attorney who has the knowledge and experience necessary to effectively fight this battle.
Our Life Insurance Lawyers Can Help
Our live insurance attorneys have a history of securing life insurance benefits payouts to beneficiaries who have been denied by insurance companies. Whether you have received a denial notice based on one of the issues listed above, been denied for another reason, or have seen your claim languish far beyond the 30-day period the law allows for investigation, we can help. Just schedule a free consultation to get started.