Common Reasons for Delays or Denials of Life Insurance Claims
Life insurance companies will go to great lengths to delay or deny claim payments. Though these companies seem altruistic enough when life insurance policies are advertised, they exist for one reason: to make a profit. If life insurance companies pay all claims in full and on time, it cuts into the companies’ profits. Let’s take a quick look at the top reasons for life insurance claim denials and delays.
The Policy Does not Cover the Type of Death
The type of death matters a great deal in the context of life insurance policies. As an example, an individual who perishes while participating in a dangerous activity such as scuba diving or skydiving might have violated the terms of his or her life insurance policy. However, in most cases, the sole cause of death type not covered by life insurance policies is suicide within the two year contestability period.
Death During the Period of Contestability
Life insurance policies have contestability periods that last for two years following the date of purchase or renewal of policy. If an insured dies within the contestability period, the life insurance provider will analyze the life insurance application in-depth to determine if accurate information was provided. If the applicant misstated about anything on the application, the carrier might refuse to provide the death benefit even if the misstatement was accidental. As an example, an applicant who misstated about something like a medical condition and subsequently passes away in a plane accident that had nothing to do with the medical condition can still end up with a death benefit denial.
Failure to Stay Current With Policy Premiums
Insurance providers require policyholders to adhere to policy terms. If the policy premiums are not paid promptly, the policy will lapse or be cancelled. If this happens if may prove difficult if not impossible to collect. Even older policyholders who forget to pay their premium due to dementia will likely find their policy is canceled or denied. The best option is to have policy payments automatically taken out of your checking account.
Failure to Provide Relevant Personal Information
The failure to disclose the information necessary for the life insurance company to accurately gauge the risk of a potential payout is one of the more common reasons for claim denials. Even accidentally misstating the truth when applying for coverage can result in a claim denial. There is a difference between errors such as entering the wrong driver’s license number on the application and intentional misrepresentation. As an example, a life insurance applicant who does not list a DUI conviction on his application may provide the life insurance provider with a basis to try to deny the claim.
There is no Designated Beneficiary
The failure to identify a beneficiary really can result in a life insurance claim denial. Our state’s unique laws will play a part in how benefits are paid in such a situation. Even if the failure to name a beneficiary does not result in a claim denial, it will certainly result in a delay. Also, often times after a divorce the ex-spouse is automatically removed from the policy as a beneficiary. This can result in the policy being paid to the estate of the insured person instead of the intended beneficiary. If you have gone through a divorce, it is important to review your life insurance policies to make sure your beneficiary is still designated.
Death That Occurs Immediately After the Policy is Taken Out
Though it is possible for a life insurance claim to be paid when an individual passes away weeks or months after obtaining the policy, such a death will almost certainly cause the claim to come under greater scrutiny. Life insurance providers are extremely suspicious of deaths that occur so quickly after obtaining a policy. Plenty of companies will deny such claims due to fear of foul play or fraud.
The Death was not an Accident
Some life insurance providers construct policies so benefits are only paid if the insured party perishes during or after an accident. These policies are usually referred to as Accidental Death Policies or Accidental Death and Dismemberment Policies. If your or a loved one as one these types of policies, the insurance company will refuse payment if death is caused by illness or related to intoxication. The claim may also be denied, if the insurance company suspects the individual’s actions were reckless and the death was not an “accident” as that term is narrowly defined in the policy.
Our Legal Team is Here to Help With Your Life Insurance Claim
If your life insurance claim has been delayed or denied, do not assume it will all work out in due time. You need an insurance claim attorney in your corner to fast-track your claim and obtain the money you are owed. Contact The Callahan Law Firm today to learn more about how we can help with your life insurance claim.
Michael S Callahan is an attorney and founder of The Callahan Law Firm. He focuses his practice on representing individuals and families in personal injury cases involving motor vehicle and truck accidents, workplace accidents and defective products. With over 25 years of experience, he is dedicated to fighting on behalf of people whose lives have been forever altered by the negligence and carelessness of corporations and individuals. Originally trained as a mechanical engineer, Michael has been practicing law and fighting for justice for those who need it most since 1994. He is board-certified in Personal Injury Trial Law by the Texas Board of Legal Specialization and a member of various esteemed legal associations. Outside of work, Michael enjoys spending quality time with his family, outdoor activities, and continually striving to improve as a trial lawyer and human being.