Our firm is happy to announce the successful resolution of a $308,500 life insurance claim that was denied due to bankruptcy nondisclosure on the application.
Bankruptcy life insurance claim denials have been increasingly more prevalent in recent years. Life insurance providers undertake a comprehensive evaluation of an individual's financial background and present circumstances to gauge their eligibility and assess the risk associated with the policy. Creditworthiness, often encapsulated in the credit score, is a factor with respect to the assessment of a life insurance policy. A low credit score, stemming from a bad financial history marked by late payments, defaults, or high credit card balances, can trigger alarm bells for insurance providers. Beyond the credit score, income and employment stability emerge as critical considerations for life insurance providers. A stable income is a factor, and any indications of irregular employment history or insufficient income can cast doubt on the applicant's ability to fulfill premium obligations. The debt-to-income ratio, another metric scrutinized by insurers, is evaluated to ensure that the individual can responsibly handle financial commitments. A high level of existing debt relative to income may be viewed as a red flag.
The bankruptcy issue carries profound implications in the realm of life insurance. A declaration of bankruptcy signals financial distress and a potential inability to meet financial obligations, making it a crucial factor in the assessment of a claim. Individuals who have recently undergone bankruptcy proceedings may find their life insurance claims facing substantial hurdles. Accuracy and completeness in the information provided during the application process are important in the life insurance arena. Inaccuracies or omissions regarding financial details on the initial application is a reason for a denied life insurance claim.
We would like to highlight some other ways bankruptcy may impact your life insurance in diverse ways, contingent upon factors such as the policy type, the bankruptcy chapter filed, and the temporal relationship between the bankruptcy and the claim. Various scenarios illustrate how bankruptcy might result in a denial of a life insurance claim:
In the case of a term life insurance policy, devoid of cash value, filing for Chapter 7 bankruptcy typically leaves the policy unaffected. However, should you neglect premium payments during the bankruptcy process, your policy might lapse, leading to your beneficiaries being deprived of any death benefit.
For a permanent life insurance policy, endowed with cash value, initiating Chapter 7 bankruptcy could expose the policy to liquidation by the bankruptcy trustee. This entails the possibility of the trustee selling the policy or leveraging its cash value to settle your debts. In such an event, the policy might lose its value or be terminated, causing your beneficiaries to miss out on the death benefit.
Chapter 13 bankruptcy, revolving around a repayment plan, generally does not impact your life insurance policy. Nonetheless, non-compliance with the plan's terms, such as failing to make regular payments to the trustee, could result in the dismissal or conversion of your bankruptcy case to Chapter 7. This puts your policy in jeopardy of liquidation or lapse, leading to your beneficiaries being denied the death benefit.
If you find yourself as the beneficiary of a life insurance policy and the insured passes away within 180 days before or after your bankruptcy filing, the policy proceeds might become part of your bankruptcy estate. Consequently, the trustee could utilize the proceeds to satisfy your creditors, leaving you without any funds from the policy. Nevertheless, depending on your state's exemption laws and the policy type, you may be able to assert an exemption to retain the proceeds.
It is essential that a person who has been denied their life insurance claim retain one of our top life insurance claims attorneys. Our life insurance law firm handles all: delayed life insurance claims; denied life insurance claims; beneficiary disputes; and life insurance interpleaders. We handle: denied FEGLI claims and denied SGLI claims as well.