One of the most common reasons employer provided life insurance claims are denied is the insurer’s assertion that the worker was not eligible for coverage at the time of death. These denials often surprise families because premiums were deducted, coverage appeared active, and no warning was ever given that eligibility was in question.
An “employee not eligible” denial is frequently wrong and often reversible, especially when the denial is based on employer mistakes or misapplication of plan rules.
What “Not Eligible” Means in Group Life Insurance
Group life insurance eligibility is controlled by the terms of the employer’s benefit plan. Insurers deny claims by arguing the employee did not meet eligibility requirements when they died. Common eligibility criteria include:
Full time employment status
Minimum hours worked per week
Active employment on the date of death
Completion of a waiting period
Proper enrollment in the plan
If the insurer claims any of these requirements were not met, it may deny the claim even when premiums were deducted and coverage appeared in force.
Common Situations That Trigger Eligibility Denials
Eligibility denials usually arise from administrative or employment status issues rather than intentional wrongdoing. The most common scenarios include:
Employee moved from full time to part time
If the employee’s hours dropped below the plan threshold, the insurer may argue coverage ended even if no notice was provided.
Unpaid leave or medical leave
Insurers often deny claims when an employee was on FMLA, disability leave, or unpaid leave, claiming the worker was no longer “actively at work.”
Recent termination or resignation
If death occurs shortly after termination, insurers may assert coverage ended immediately, even when final paychecks still included deductions.
Failure to complete enrollment paperwork
Employers sometimes fail to submit enrollment forms or submit them incorrectly, leaving the insurer to claim no coverage ever existed.
Waiting period disputes
If death occurs shortly after hire, insurers may argue the employee died before eligibility began, even when the employer represented that coverage was active.
Payroll deduction errors
Premiums may be deducted but never forwarded to the insurer. The insurer then denies coverage despite the employee paying for it.
Why These Denials Are Often Wrong
Eligibility denials frequently ignore key facts, including:
The employer represented the employee as covered
Premiums were deducted from paychecks
No notice of ineligibility or termination of coverage was given
The plan failed to explain conversion rights
The employer misclassified the employee’s status
Under ERISA, plan administrators and insurers have duties to communicate clearly, administer benefits accurately, and notify employees when coverage ends or changes. When they fail, denials based on eligibility can be overturned.
ERISA Makes These Claims Time Sensitive
Most employer provided life insurance plans are governed by ERISA. ERISA imposes strict procedural rules, including:
Short deadlines to appeal
Limited evidence allowed after the appeal stage
Deference given to the insurer if the appeal is weak
In many cases, beneficiaries only get one chance to appeal. A poorly prepared appeal can permanently destroy the claim.
Example of a Reversed Eligibility Denial
A family was denied benefits after the insurer claimed the employee was ineligible because he was on unpaid medical leave at the time of death. Payroll records showed premiums were still deducted, and the employer never notified the employee that coverage had ended or that conversion was required. After a legal appeal, the insurer paid the full benefit.
What to Do If Your Claim Was Denied for Ineligibility
If the denial letter says the employee was not eligible:
Do not assume the insurer is correct
Obtain the full plan document and summary plan description
Gather pay stubs showing premium deductions
Collect employment and HR records
Request the complete claim file
Speak with a life insurance attorney experienced in ERISA denials
These cases are won by proving that the employer or insurer failed to follow the plan or failed to give required notice.
The Bottom Line
“Employee not eligible” is one of the most abused justifications for denying group life insurance claims. These denials often result from employer mistakes, poor communication, or insurers applying plan terms unfairly after death.
If your employer sponsored life insurance claim was denied because the worker was allegedly not eligible, the denial deserves immediate legal review. Many of these claims are successfully reversed when challenged correctly and on time.