Our top life insurance lawyers recently resolved a $1.1 million dollar life insurance claim, and we know how important it is to understand why claims get denied and what you can do if your claim is rejected.
In this blog, we’ll explain why life insurance claims get denied, how to handle a denial, and what steps you can take to potentially reverse a claim denial and secure the payout your family deserves.
Why Do Life Insurance Claims Get Denied?
There are a variety of reasons why life insurance claims are denied. The insurance company may reject your claim for a number of factors, including issues related to policy terms, your eligibility, or discrepancies in the application process. While some denials are based on legitimate grounds, others can be disputed or appealed.
Here are some common reasons life insurance claims are denied:
1. The Policy Lapsed
If you missed premium payments and your life insurance policy has lapsed, there may be no coverage when you pass away. Insurance companies typically provide a grace period (30–60 days) for missed premiums, but if the premiums are not paid within this time frame, the policy could be voided.
2. Death Not Covered Under the Policy
Some life insurance policies have exclusions related to the cause of death. For instance, accidental death may not be covered if the death occurred under specific circumstances, such as suicide within the first two years of the policy, alcohol or drug-related causes, or involvement in dangerous activities like extreme sports or illegal activities.
3. Incorrect Beneficiary Designation
If there is a dispute about the beneficiary's relationship to the insured, or if an ex-spouse is still listed as the beneficiary after a divorce, the insurance company may deny the claim. Similarly, if the beneficiary is not legally entitled to receive the payout (such as a non-relative or someone not named in the policy), the insurer may refuse to release the funds.
4. Employer-Provided Coverage Issues
In cases where the life insurance policy is through an employer (such as group life insurance), coverage can be lost when the employee leaves the company. If the policyholder leaves their job, the employer-provided life insurance may be terminated, leaving the beneficiaries with no payout.
How to Handle a Life Insurance Claim Denial
If your life insurance claim is denied, don't give up. There are steps you can take to appeal the decision or fight for your rightful claim. Below are some key actions to take:
1. Contact the Insurance Company
The first step after receiving a denial letter is to contact the insurance company for clarification. Sometimes, denial letters don’t provide specific details, and the insurer might be hoping you’ll accept the decision without question.
Ask for a detailed explanation about the specific reason for the denial, and inquire about the appeals process. Many insurance companies offer an appeals process where you can submit additional evidence or documentation to support your case. Understanding the reason for denial will help you decide whether you should proceed with further action.
2. Review the Denial Letter
If the insurance company provided a reason that relies on specific clauses in the policy (such as an exclusion clause or contestability clause), review the terms carefully. Policies often have fine print that can be hard to interpret, but understanding it fully will allow you to determine whether the denial was justified. In some cases, you may find that the denial was based on misinterpretation of the policy terms.
3. Consult a Life Insurance Lawyer
If you’re uncertain about the denial or if the insurance company is unwilling to reconsider the decision, it’s time to consult a life insurance lawyer. A qualified lawyer can help you understand your legal rights, evaluate the legitimacy of the denial, and guide you through the process of appealing, contesting, or even filing a lawsuit if necessary.
FAQ: Frequently Asked Questions About Life Insurance Claim Denials
1. Why do life insurance claims get denied?
Common reasons for a denied life insurance claim include policy lapses, death exclusions (e.g., suicide within the first two years), incorrect beneficiary designation, or employment-related coverage issues.
2. How can I appeal a denied life insurance claim?
To appeal a denied claim, contact the insurer and ask for specific details about the denial. If the insurer provides an appeals process, submit any additional documentation to support your claim. If the insurer doesn’t offer an appeal or refuses to reconsider, consider consulting a life insurance lawyer.
3. Can an insurance company deny a claim due to suicide?
Yes, most policies have a suicide clause, typically excluding coverage if the insured dies by suicide within the first two years of the policy. However, if the policyholder passes away after this period, the claim may be accepted.
4. Can my life insurance claim be denied if I leave my job?
If your life insurance was provided through your employer, the coverage may end once you leave the company. However, conversion options or portability may allow you to keep the policy. Be sure to check your employer’s policy to understand your options.
5. What should I do if my claim is denied due to policy exclusions?
If your claim is denied due to exclusions in the policy, it’s important to review the terms and conditions carefully. A life insurance lawyer can help you determine if the denial is justified or if the insurer acted in bad faith.