Many times, people find their way to our website because they have had a claim denied by a life insurance company and that claim denial simply doesn’t make sense to them. As attorneys who handle denial of life insurance claims and fraudulent beneficiary changes, we’ve handled just about every type of case in this area. In fact, if you search our blog pages hard enough, you’ll probably find a case similar to yours.
We like to report on all the different types of claims that insurance companies try to deny. We especially like it when we can report to you that a specialized attorney helped a policy beneficiary receive the award their loved one intended for them. Regardless of the specifics of your situation, however, it is important for you to understand some of the basic principles of life insurance law as you try to navigate this difficult battle. This article is intended to give you some of the baseline information that you’ll need in order to understand your case.
#1: Life insurance companies are for-profit entities
Sometimes people get confused about the purpose of a life insurance company. In many ways, these companies seem like the “good guys.” After all, it is their job to swoop in and provide a significant payout to a person who is grieving the death of a loved one. What could be wrong with that?
If life insurance companies simply paid all the people they owe money to, there would be nothing wrong with that. If life insurance companies did that, however, their yearly profits would suffer. That’s right … like any other business, life insurers exist for the sole purpose of creating profits.
They do this in two principle ways: (1) they collect premium payments from policyholders; and (2) when that policyholder dies, they come up with reasons not to pay claims against the policy. The more successful the insurer is at both of these things, the more profits it generates for its shareholders.
#2: The drive for profits leads to bad decision making
Because life insurers are so intent on generating profits, they often have to deny claims that are perfectly legitimate. For example, they might deny a claim on the grounds that the insured committed suicide, even when every police report and autopsy report reaches a different conclusion.
Why do they do that? Well, they’re hoping that the grieving beneficiary who submitted the claim will be too upset to fight the company’s bogus decision. The more times they can convince beneficiaries to “give up and go home,” the more money they can keep in their corporate coffers.
#3: Life insurance employees often know their denial decisions are wrong
The people who work at life insurance companies are not dumb. To return to the prior example, they know that when police and autopsy reports conclude a person died accidentally, it’s highly unlikely the person died from suicide. Nonetheless, they will still issue denial letters based on completely faulty reasoning because they are under intense pressure to avoid making policy payouts.
These are not bad people. They are people who are just doing their jobs the way their employer mandates. Moreover, they may become eligible for personal bonuses for saving the company from having to pay out on large claims.
#4: The life insurance company is betting you won’t fight them
When a life insurance company denies a claim that clearly should be paid, they are probably doing so with full knowledge that their decision is wrongful. The thing is, life insurers employ all sorts of mathematicians to analyze all sorts of data. That data tells them that many beneficiaries do not have the will to fight them in court. In other words, no matter how crazy the reasoning behind a claim denial letter, the insurance company is making a calculated bet that you don’t have the wherewithal to fight them in court.
#5: The life insurers sometimes have valid reasons to deny claims
Look, it is our job to catch life insurance companies in issuing phony claim denial letters. We do this work day in and day out so that real-life beneficiaries can collect on the insurance payouts their loved ones intended for them. It’s important to note, however, that there are numerous reasons why an insurance company might validly deny a claim. Here are some of the top reasons:
- The insured lied in his insurance application. Let’s say someone obtained a life insurance policy after telling the insurance company they were a non-smoker when, in fact, they had a 30-year, 3-pack a day smoking habit. If that person dies from a lung-related illness, the life insurance company probably has a right to deny the claim. This is because the insured obtained the policy based on fraud.
- The insured failed to make policy payments. A life insurance policy is only effective if the insured makes all the required premium payments. So long as the insurer has provided proper notice of non-payment and given the insured the option of catching up on missed payments, the company is probably within its rights to deny a claim against that policy.
- The insured died doing something he wasn’t supposed to do. Some policies offer reduced premiums if the insured agrees to refrain from certain dangerous activities (SCUBA diving, skydiving, and motorcycle racing are some good examples). If the policyholder agrees to avoid those activities but then dies while engaged in one of them, it’s unlikely the insurer will be made to pay.
The truth is, life insurance policies are complex legal documents. They are drafted by the insurance companies in a manner that is favorable to them. That’s why any person facing the wrongful denial of a life insurance claim should contact a specialized lawyer without delay. Our firm handles denial contests every single day and we have done so for years. Call us today to see if we can help straighten out the claim denial you’re faced with.