Can a life insurance company deny a claim on a valid policy if the insured dies?
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UPDATED: Jul 16, 2021
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Yes. Apart from fraud in the inception of the policy, or fraud by substitution, the most common ground life insurers use to deny claims is that there was a “material misrepresentation” in connection with the insurance.
The material misrepresentation may occur in the original application for the insurance or in an amendment to the application or in an application for reinstatement for Individual or Group Life cases, or in an application for late enrollment in a Group case.
A material misrepresentation sufficient to deny a claim can not be just any misstatement. (For example, if you said you had green eyes but the company would say they are hazel, that would NOT be material.) Under many states’ laws, a material misstatement is one that if fully and truthfully disclosed would have led to a refusal by the insurer to issue the policy, at least on the terms and conditions it issued the policy.
While a material misrepresentation can be made about almost anything the application seeks to uncover, such as the applicant’s occupation, employment history, age, income, other insurance in force, prior applications for insurance, insurance claims made, cigarette smoking or tobacco usage (and other slow suicide attempts), driving record or tickets, drinking, hobbies, piloting or flying in non-commercial aircraft, etc, the most commonly charged misrepresentations involve an applicant’s state of health and medical history.