Why Your Life Insurance Claim is Denied
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UPDATED: Aug 13, 2020
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If your life insurance claim is denied, you need to find out why and decide what action is available to you. A life insurance claim denial can be difficult, but if handled appropriately you may be able to get the benefits.
TIP: If your life insurance claim is denied, you should contact an experienced insurance attorney as soon as possible. An attorney can research the claim denial and assist you collecting any benefits wrongfully denied.
Life Insurance Claims Denied for False Information
The most common reason a life insurance claim is denied is an alleged material misstatement made by the insured on the application. A material misstatement is one that is stated on the application that if not stated would have clearly led to a refusal by the insurer to issue the policy. Any statement, or omission, that hides the truth about a major health problem which could have influenced the insurance underwriting, the decision to offer a policy, or the cost of insurance is considered a material misstatement or omission. When life insurance claims are denied for material misstatements, the company is rejecting coverage because it was misled at the time insurance was purchased.
TIP: Denying coverage for a material misstatement can happen after the life insurance contestability period has expired.
It is not uncommon for insurance companies to look for material misstatements or omissions that will provide them with a reason to deny a life insurance claim. Make sure you are honest on your life insurance application! It is also a good idea to record or get in writing any statements made to you by the agent. Agents may breeze over information or cut corners to advance a sale, and if you filled out an application following an agent’s instructions and your life insurance claim was denied accordingly, you need to challenge the company.
Other Reasons Why a Life Insurance Claim is Denied
There are several other reasons why a life insurance claim is denied:
- Death occurred in the life insurance contestability period. During the life insurance contestability period, the company can cancel the coverage and return the premium if it discovers that the information given by the policyholder to qualify for the insurance contains misstatements. Usually this period of time is in the first one to two years of the policy. The life insurance contestability clause provides the company a reasonable opportunity during this period to protect itself against people getting insurance that would not have qualified for it if they gave truthful information on their application. Insurance companies tend to be particularly nit-picky about statements on the application during the life insurance contestability period.
- Death right after the policy was purchased. Of course, there are plenty of instances where an insured has died within months of taking out an insurance policy. However the claim will likely get a second look because of potential fraud and foul play.
- The policy does not cover the way the insured died. Some policies do not cover accidental death, while others only cover it. Most life insurance policies do not cover suicide, and obviously none will pay out to a beneficiary who causes the death of the insured. Your life insurance policy will detail the death circumstances that are not covered, so be sure you know them before you purchase a life insurance plan and make any adjustments that are necessary.
There may be other reasons life insurance claim is denied. If you are a beneficiary and you feel the life insurance claim has been denied wrongfully, you need to contact an experienced attorney immediately, and before you take any action to respond to the company.
What a Company Must Do When Your Life Insurance Claim is Denied
Every state regulates the process for life insurance claim denials. There are some things that you need to be aware of if your life insurance claim was denied:
- The company must provide you reason and notice of your claim denial: If the company has not provided a legitimate reason for their decision, they may be in violation of local life insurance law, and can be sued to recover the wrongfully withheld life insurance payment.
- The life insurance claim must be reviewed in good faith: The life insurance claim cannot be denied for an arbitrary reason, nor can the insurance company approach a claim with the intent on denying it. The company must give each claim a fair review.
If you feel you life insurance claim was denied unfairly, talk with an attorney. An experienced attorney would be able advise you on how to proceed after a denied life insurance claim, which may involve filing a lawsuit in an effort to get you the money you deserve. Attorneys usually offer free consultations and work on a contingency fee, so do not be afraid to reach out to one if you think you have a case. Click here if you need to speak with an attorney on your denied life insurance claim.
Read more articles about life insurance claims, lawsuits, and attorneys by clicking here.