Life insurance companies delay claims for one simple reason.
Delay costs beneficiaries time.
Delay costs insurers almost nothing.
That changes when statutory interest applies.
In many states, insurers that wrongfully delay paying life insurance benefits owe interest on top of the death benefit. When applied correctly, interest turns delay into a liability instead of a tactic.
What statutory interest actually is
Statutory interest is a penalty imposed by law when an insurer fails to pay benefits within a required time period.
It is not discretionary.
It is not based on fairness.
It is triggered by delay.
Each state sets its own rules, including:
When interest begins to accrue
The applicable interest rate
Whether interest is mandatory or conditional
Whether good faith excuses delay
Insurers rarely explain this to beneficiaries.
When interest typically starts running
Most statutes tie interest to a specific event, such as:
Receipt of proof of loss
Completion of claim investigation
Expiration of a statutory payment window
Issuance of a wrongful denial
Insurers often argue that interest never started because the claim was “under investigation.”
That argument is frequently overstated.
Delay versus investigation
Insurers are allowed reasonable time to investigate a claim.
They are not allowed unlimited time.
Common delay tactics include:
Repeated document requests
Waiting on third party reports indefinitely
Leaving claims marked “under review”
Restarting investigations without explanation
At some point, delay becomes wrongful. That is when interest exposure begins.
Why insurers downplay interest exposure
Interest undermines the economics of delay.
Once interest is in play:
Every month costs the insurer money
Reserves increase
Settlement pressure rises
Denials become riskier
For that reason, insurers often ignore or minimize interest until it is forced into the conversation.
Interest as leverage in negotiations
Statutory interest is rarely the headline issue.
It is leverage.
When properly documented, interest can:
Increase settlement value
Shorten delay timelines
Force insurer explanations
Undermine claims of reasonableness
In some cases, interest alone becomes significant, especially in large benefit policies delayed for years.
ERISA claims are different
Most ERISA governed group life policies do not automatically allow state statutory interest.
Some courts allow interest as equitable relief. Some do not.
That distinction matters.
Interest arguments are strongest in individual life insurance policies governed by state law.
Common insurer arguments against interest
Insurers often argue:
The delay was reasonable
The claim was complex
Information was missing
The beneficiary caused the delay
Interest is discretionary
These defenses succeed only when supported by facts. Blanket delay is rarely excused.
How interest exposure changes litigation posture
Once statutory interest is clearly in play, insurer posture often shifts.
Denials get reconsidered.
Settlement discussions accelerate.
Delay tactics fade.
Interest reframes the dispute from whether to pay to how much delay will cost.
Why beneficiaries rarely hear about this
Most beneficiaries focus on getting the death benefit paid.
Insurers encourage that focus.
They do not volunteer that delay may be costing them money or that interest is accruing.
That silence is strategic.
How these claims are actually used
Successful use of statutory interest requires:
Identifying the correct statute
Pinpointing when interest began
Documenting unreasonable delay
Preserving the issue early
Raising it before litigation or during it
When done correctly, interest becomes a pressure point insurers cannot ignore.