Greg was a busy university Dean. When he was offered life insurance through a group policy at work, he agreed to apply—encouraged by his wife, Sandy. Because of his schedule, he completed the application verbally with the help of a secretary in the Human Resources office. Greg answered all questions truthfully, including one about his income. He earned $250,000 per year.
Unfortunately, the secretary accidentally recorded his salary as $2.5 million—a simple clerical error involving a zero. Greg never noticed the mistake. Based on the application, the insurance company issued a policy valued at $3 million, assuming his salary justified that coverage level.
Just over a year later, Greg tragically died in a cycling accident. Sandy filed the claim and submitted all required documents. Because Greg had died within two years of the policy’s start, the insurer launched a contestability review and quickly discovered the income discrepancy. They alleged Greg had lied and denied Sandy’s claim outright. If you need an Illinois life insurance lawyer call us.
Why Income Matters in Life Insurance Policies
Most group and private life insurance policies limit the death benefit to a multiple of the insured’s income. This is because life insurance is meant to replace lost income—not enrich beneficiaries. If someone earning $60,000 applies for a $2 million policy, the insurer may reject the application or flag it for review. Likewise, income misstatements can lead to benefit adjustments or claim denials.
In Greg’s case, the insurer used the income error to argue that they never would have approved a $3 million policy had they known his actual earnings. That argument would have held weight—if Greg had made the error himself. But the facts told a different story.
The Role of a Life Insurance Attorney in Reversing the Denial
Thankfully, Sandy contacted a life insurance attorney who specializes in wrongful denials. He immediately identified that the key legal issue was intent. A material misrepresentation requires that the insured knowingly provided false information. In this case, Greg gave the correct answer. The error was made by a third party.
The attorney collected a sworn affidavit from the HR secretary admitting to the typo. He also submitted Greg’s pay stubs and HR records to validate the true income. Using this evidence, he appealed to the insurer’s internal review board and argued that while Greg was not entitled to a $3 million benefit, the correct amount—based on a $250,000 salary—should still be paid.
The insurer agreed and approved a $300,000 payout. Had Sandy not retained counsel, she may have received nothing. It’s a powerful reminder that legal representation can make all the difference when facing a denied life insurance claim.
Frequently Asked Questions (FAQ)
Q: What is a material misrepresentation in a life insurance application?
A: It’s a false statement or omission that would have impacted the insurer’s decision to issue the policy or determine the coverage amount.
Q: Can a simple typo really void a life insurance policy?
A: Not if it was unintentional or made by someone else, like an HR staffer. If there’s no evidence of intentional misrepresentation, the claim should still be valid.
Q: What happens during the contestability period?
A: The insurer can review the original application and medical history if the insured dies within the first two years of coverage. If a misstatement is found, they may try to deny the claim.
Q: Can a policy be partially paid if the coverage amount was based on incorrect income?
A: Yes. If the insurer can verify that the applicant qualified for a lower amount, they may reduce the benefit but still pay a valid claim.
Q: Do I need a lawyer if my claim is denied for misrepresentation?
A: Absolutely. A life insurance lawyer can assess the claim denial, gather supporting evidence, and negotiate or litigate to secure the payout you deserve.