Our life insurance lawyers recently helped resolve a $200,000 denied Globe Life insurance claim, and we understand how critical it is to understand the reasons behind the denial. Let’s dive into the most common reasons life insurance claims get denied and how you can prevent or contest these denials.
1. The Death Happened During the Contestability Period
Nearly every life insurance policy includes a contestability period, which is a set time (usually the first two years of the policy) during which the insurance company can investigate the policyholder's death and potentially deny the claim.
During this time, if the insurer finds that any misrepresentations or omissions were made during the application process—such as undisclosed health conditions or risky activities—they may use this period to deny the claim.
While a death during the contestability period doesn’t automatically mean a denial, it does significantly increase the chances of one. It’s crucial to be thorough and honest when filling out your life insurance application to avoid issues later on.
What You Can Do:
Know the contestability period: Review your policy to know when this period ends.
Be honest and transparent: Ensure all information is accurately disclosed when purchasing the policy.
2. The Type of Death Isn’t Covered
Each life insurance policy comes with specific coverage exclusions. Historically, older policies often excluded deaths caused by risky activities, such as skydiving or bungee jumping. Today, the most common exclusion is suicide.
If the policyholder commits suicide within the contestability period, the insurer may deny the claim outright. However, if the suicide occurs after the contestability period, the suicide exclusion might no longer apply, and the beneficiary may be entitled to the payout.
What You Can Do:
Check for exclusions: Review your policy to identify any exclusions, such as suicide, or activities considered high-risk.
Understand the conditions: Be aware of the impact of suicide exclusions if the policyholder has been struggling with mental health.
3. Omitted Relevant Personal Information
Perhaps the most common reason for life insurance claim denials is the failure to disclose relevant information during the application process. Insurance companies rely heavily on the information provided during underwriting to assess risk and determine premium rates. If important details, such as pre-existing medical conditions or driving under the influence convictions, are omitted, the insurer may deny the claim.
During the contestability period, insurers are more likely to scrutinize the application closely. Unintentional omissions, such as failing to mention a past medical condition, can lead to a claim denial.
What You Can Do:
Be thorough and honest: Ensure all information on your application is complete and accurate.
Review your application: Before submitting, double-check everything, particularly health and lifestyle details.
4. You Didn’t Pay Your Premiums
Like any other form of insurance, life insurance premiums must be paid on time to keep the policy active. If premiums are missed, the policy may lapse, and the insurer may deny the claim when the policyholder dies.
Setting up automatic payments is a good practice to avoid missing payments, particularly for seniors who might forget due to memory issues or other health-related concerns.
What You Can Do:
Pay premiums on time: Set up automatic payments to ensure timely coverage.
Monitor policy status: Keep track of any missed payments and reactivate your policy as soon as possible.
FAQ: Frequently Asked Questions About Life Insurance Claims Denials
1. Can life insurance be denied during the contestability period?
Yes, during the contestability period (usually the first two years), the insurance company has the right to investigate and deny the claim based on misrepresentations or omissions in the application process.
2. Are there any deaths not covered by life insurance?
Yes, life insurance exclusions often include deaths from risky activities (e.g., skydiving) or suicide within the first two years. Be sure to review your policy to understand any exclusions.
3. What happens if I fail to disclose medical information when applying for life insurance?
If you omit important medical information or other relevant details, the insurer may deny your claim, especially during the contestability period. It’s essential to disclose all relevant information during underwriting.
4. Can a life insurance claim be denied for non-payment of premiums?
Yes, if premiums aren’t paid and the policy lapses, the insurer may deny the claim. Make sure to keep your premiums up to date, especially if you’re dealing with a senior policyholder.
5. How do I fight a life insurance claim denial?
If your claim is denied, the first step is to contact the insurer to understand why. If the denial is unjustified, you can file an appeal. Working with a life insurance attorney can help you navigate the appeals process and challenge the insurer’s decision.