There are many contingencies that could cause life insurance policies to be void. Each life insurance company has a unique claim handling process, just like with renters and auto insurance. No matter the reason, denials of claims during difficult times after the death of a loved one can complicate the entire situation for families and heirs that are not prepared.
Certain situations may lead to life insurance claims being denied. There are a few steps you can take to help you get your benefits if your life insurance claim gets denied. This article will help you understand the reasons why life insurance companies may deny your claim.
There are reasons why life insurance claims may be denied
For reasons of policy delinquency or material misrepresentation and contestable circumstances, insurers deny death benefits on life insurance claims.
In more detail, insurers deny a life insurance claim for:
Policy delinquency is when a policyholder fails to pay premiums on a timely basis, which causes the policy to become invalid. Jack Dolan, spokesperson for the American Council of Life Insurers in Washington, D.C., stated that the main reason companies deny death benefits is because they do not have coverage on the individual. Sometimes people don’t notify their beneficiaries about the expiration of their policies and let their policies expire.”
Material misrepresentation in the initial application for life insurance. Untrue statements on insurance applications can jeopardize your entire policy, regardless of whether you have a heart murmur or a history smoking.
Bridgeland, a consumer organization’s spokesperson, stated that pricing is influenced by your age and health. They may cancel the policy if he claims he is 40 rather than 45. However, they could subtract the premium from the benefit amount.
There are other misrepresentations:
- Lies about income
- Non-disclosure about another life insurance policy
- The agent has provided incorrect information in the application
- It is important to mention minor ailments.
- False representation of immigration status
A death that is not covered by the policy’s coverage is considered contestable. This could be because the time of the death falls within a disputable time frame. Insurers may deny certain claims during a contestability period, which is the first two- to three years after a policy’s effective. Contestable circumstances can include suicide and death while performing illegal acts. Although policy exclusions are decreasing in current offerings, policies that exclude death while serving in the military, acts of war or aviation, and dangerous pastimes like scuba diving, mountain climbing, and for other health risks such as HIV, may still be excluded from older policies.
Documentation failure is when heirs or family members fail to provide all the paperwork necessary to receive the death benefit. In order to begin the payment process, insurers will require a death certificate.
What is the significance of the contestability period
A probationary period is required for contestability within the first two years of a new policy. This allows the insurer to review a death benefit and examine any fraud or misrepresentations.
Although an investigation may delay the payment of a death benefit by some distance, insurers will still pay for the policy as long as there is no finding of wrongdoing on behalf of beneficiaries. For example, homicide payouts are provided by insurers only after the police have cleared the beneficiaries.
David Spain, an Orlando-based attorney that specializes in winning insurance claims settlements for denied beneficiaries, says contestability is at the heart of most of the claims he sees. Spain stated that it is not a matter of insurance companies avoiding paying a death benefit but rather that policyholders and their heirs failing to understand the application coverage.
He said, “What I see are overly complicated applications for life insurance and policies that have exclusions that are calculated so that the insurance company will benefit that most consumers will not notice them.” “I have seen people who believed they had life insurance that would pay their house off, but in reality they had an accidental death policy.”
What to do when a claim is denied
Beneficiaries who depend on the replacement of their income will be scared to receive a denial letter from life insurance. However, the beneficiary can only get a payout if the cash has cleared in their account. The policy and applicable death benefit are voidable if the insurer finds that the policyholder is fundamentally dishonest. A policyholder who commits self-harm or any other violation during the contestable period is disqualified from appealable claim denials.
State departments of insurance and lawyers offer free resources to help insurers pay valid claims in cases of obvious mishandling. Even if an insurer denies a claim, beneficiaries can still appeal the decision to an attorney.
Get in touch with the insurance company
Insurers explain their reasons for denying claims in the initial denial letter. If the reasons are unclear or lack sufficient supporting information, the proper course of action is to request more information about the specific objections to the payment of the death benefit.
When denied beneficiaries appeal a claim for compensation, the required documentation includes likely medical records, autopsy reports, or insurance payment receipts.
For cases involving employer-sponsored life insurance or similar policies, there is a 60-day appeals window.
Refuse to be rejected
Beneficiaries who have been denied benefits appeal can present evidence following the procedure set by the insurer. Self-representation is free, but it can add complexity and stress to grieving situations.
Sometimes, denied beneficiaries may contact their state’s attorney general or department of insurance to get their expert knowledge in insurance navigation. State-level representation is important because many states have insurance appeals specialists.
What do you do if you need an attorney?
Spain’s plaintiff’s lawyer said that if you receive a denial of a favorable outcome, it is time to contact a contingency attorney.
Spain, who is a lawyer at Morgan & Morgan in Orlando, stated that understanding the intricacies and workings of insurance gives plaintiffs an advantage over pro-se representation.
He said, “You can definitely set your case back by trying to do this yourself.”
Spain and other plaintiff lawyers can examine potential clients and make appeals at no cost. These contingency lawyers represent their clients and finance them with a portion if a valid case is presented.
Spain has a high success rate in trials, but that is not his first choice.
He said, “I have resolved many cases by simply putting together the correct records, the proper arguments and a letter explaining my position to the insurance company.” “Officially, they’ll also know that you’re serious.”
How to avoid having your claim denied
Avoiding claim denials is the best outcome for both the beneficiary and the policyholder. The policyholder’s approach towards the insurance application is the best way to avoid denied claims. These are some of the key considerations:
- Responses to applications – detailed responses about health and health-related behavior, including occasional smoking, prescription or other medication, and risky hobbies
- Understanding the terms and conditions of application – Clarity around the conditions under which insurers pay the death benefits and those under which they do not
- Review of application – Read and re-read completed applications as they were filled out by agents
Questions frequently asked
Which is the best type of life insurance?
There are many moving parts to determining the best life insurance. These include personal circumstances and wishes. It all depends.
The following considerations are important when selecting a life insurance company. These include the company’s past, financial stability, and pricing. These factors will ultimately impact the customer experience as well as the policy value.
Are there any medical requirements for purchasing life insurance?
An insurance medical exam for life requires a basic physical examination, including measurements of weight and height and a blood pressure test. A medical examiner may also request information about your medical history, past medical examinations, and urine and blood sample samples.
Which factors determine whether an insurer pays the death benefit?
Financial stability is a critical factor in the death benefit of an heir if there are no problems with a policyholder’s application for life insurance and no contestability issues.