Life insurance can play an important role in an estate plan. Many US citizens rely on life insurance policies to provide for their families in the wake of their deaths. To ensure the security of their spouses, children and other loved ones, hard-working people may pay life insurance premiums monthly for decades, or pay much higher premiums for policies purchased later in life.
An unexpected life insurance claim denial can be devastating to a family who has lost a loved one and provider. Read about accidental death claim process
Common Justifications for Denied Life Insurance Claims
Note that “justifications” doesn’t necessarily mean “reasons.” Of course, in some cases the justification the life insurance company offers for the denial is the actual reason for the denial. However, in many cases, the reason is simply that paying the claim will be expensive for the insurer, and the company has found an excuse to delay or deny the claim.
Unlike many industries, in which providing great service to a client or customer benefits the business, a life insurance company’s interests go against those of the customer. The customer benefits when his or her loved ones receive benefits that will support them after he or she is gone. The life insurance company makes its money by maximizing premiums received and minimizing the benefits paid out.
Most life insurance companies are pretty successful in this effort. In 2015, U.S. insurance companies took in $638 million in life insurance premiums and paid out just under $264 million in benefits.
Some of the most common the justifications offered for denial of life insurance claims include:
- An allegation that the insured made a material misstatement: “Material misstatement” is just a technical way of saying that the insured offered false information about something important. For example, if the insured concealed a medical condition when completing the application, that misrepresentation could allow the insurer to cancel the policy, even if the medical condition wasn’t the cause of the insured’s death. However, life insurance companies often attempt to deny coverage based on representations that are not material, and would not have impacted the policyholder’s insurability. For example, if the application asked the insured to list every doctor visit in the past three years and he forgot to note that he’d gotten a tetanus booster two years and eleven months earlier, that probably doesn’t constitute “material misstatement.”
- The policy doesn’t cover the particular cause of death: Some life insurance policies cover only accidental death and dismemberment, while others provide coverage for natural causes of death but exclude certain types of accidents or other events. Exclusions may be more nuanced, too. For example, life insurance law requires that general life insurance policies pay out on suicide if the policy has been in force for more than a year. But, accidental death policies don’t cover suicide—and in many circumstances the question as to whether a person died accidentally or by suicide may be open to dispute.
- The timeline or circumstances of death were suspicious: An insurer may delay a decision about paying out life insurance benefits by claiming that the circumstances of the death are suspicious or that fraud is suspected because the insured died soon after purchasing the policy.
- The policy had lapsed at the time of the insured’s death: Missed payments are a common justification for denied life insurance claims. However, sometimes those payments were actually received within the grace period, and the policy never lapsed. In other cases, it may be possible to receive life insurance benefits even if the payment wasn’t made within the grace period. It is always in your best interest to seek legal advice if you’ve received a life insurance claim denial notice.
Life Insurance Claim Denials Aren’t Set in Stone
When a life insurance company denies a claim, or even unreasonably delays processing of a claim, that company is hoping that you’ll give up and go away. If you’re deterred by the initial notice of denial, the life insurance company makes a big profit on your loved one’s policy: he or she paid years of premiums and it doesn’t end up costing the insurance company a dime. It’s like someone ordered an expensive product, paid in full and then never picked up the product or requested a refund.
Talk to an Experienced Life Insurance Denial Attorney
Our life insurance lawyers have a long and successful history of handling denied life insurance claims. If the loss of a loved one has been aggravated for your family by a denied life insurance claim, we can help. Schedule your free consultation right now.
You don’t have to accept that denial at face value.