5 Reasons Why Life Insurance Claims Are Denied
Insurance companies are businesses. And like any other business, they do everything in their power to bring in huge profits every year. That means they will go to great lengths to find a reason to deny a life insurance claim. While some of these reasons can be legitimate, many insurers will not hesitate to use shady or questionable reasons to deny life insurance claims. We’ll explore the five most common reasons why life insurance claims are denied in this article.
If your life insurance claim was denied, you do not have to simply give up and move on. Instead, you can exercise your legal rights to obtain the compensation you need. To learn more, contact a dedicated life insurance attorney today.
5 Top Reasons Insurers Deny Life Insurance Claims
Although insurers could use any number of reasons to deny a life insurance claim, a few reasons occur with much greater frequency than others.
Reason #1 – Your Policy Did Not Designate a Beneficiary
Every life insurance policy should designate at least one person to receive the monetary benefit in the event of the policyholder’s death. This person is known as the beneficiary.
Your insurer may deny your claim if you did not designate a beneficiary on your life policy. In some cases, the insurer will pay out the funds to the wrong person. In other cases, the death benefit will go to the deceased’s estate. While the deceased’s family can collect from this benefit, they may have to pay additional taxes.
Reason #2 – The Cause of Death Is Not Covered
Virtually every life insurance policy contains a list of exclusions. These exclusions generally encompass various forms of death, which, if they occur, will not result in a payout. Suicide is a common cause of death that is excluded under a life insurance policy.
Other common exclusions include risky activities like spelunking, cliff diving, and scuba diving. Unfortunately, shady insurers will sometimes use vague and poorly-defined exclusions to deny your claim.
Reason #3 – The Policyholder Failed to Pay Policy Premiums
Failing to pay policy premiums is another common reason insurers deny life insurance claims. Even a small period of missed payments can cause a life insurance policy to lapse. If the holder’s death occurs during this time, the beneficiary will be left with few options.
That said, many policies have a 30-day grace period to cut some slack to policyholders. If your loved one’s death occurs during the grace period, your claim should be accepted.
Reason #4 – The Policyholder’s Death Occurred During the Contestability Period
Most life insurance policies include a contestability period. During this period—which is often two to three years—the company reserves the right to investigate the policyholder’s application for evidence of inaccuracies or fraud.
So if you purchase life insurance and die soon afterward and during the contestability period, the insurance company can use this time to try and find any evidence of misrepresentations and deny your claim. But this is often a pretext. The best way to overcome this tactic is to consult an experienced life insurance attorney to assist you.
Reason #5 – You Made False Representations or Provided Incomplete Personal Information
When policyholders make completely bogus representations on their policy application, it is only understandable that the insurer could deny the claim. This is especially true when policyholders conceal things like criminal history and medical conditions.
But some “false” or “incomplete” representations are nothing more than spelling errors. Simply writing your driver’s license number incorrectly or misspelling your street address should not lead to a claim denial.
When Are Life Insurance Claims Denied?
It depends. The few statistics we have regarding life insurance claims show that insurer denial rates vary wildly from one company to another. According to one source, about 18% of in-network health insurance claims (including life insurance claims) were denied in 2020. Yet the denial rates for individual insurers ranged from less than 1% to more than 80%. Consequently, it is difficult to predict the chances of your insurer denying your claim.
Was Your Life Insurance Claim Denied? Let Us Help You Today.
Processing the death of a loved one can feel almost impossible. The last thing you need to deal with while you're grieving is financial insecurity. So if your life insurance claim was denied, don’t lose hope. Instead, contact the Peace Law Firm.
For over 20 years, our team has helped countless clients prevail time and time again. Thanks to our years of experience representing clients in life insurance cases, we know the common tricks insurance companies use to deny people the benefits they serve. We’re dedicated to ensuring each one of our clients gets a fair and just outcome.
Many people decide not to visit an attorney because they’re worried about the cost of an initial visit. However, Peace Law Firm offers free initial consultations to all potential clients, so there’s no reason not to visit us. Don’t wait. Contact the Peace Law Firm today to learn more about how we can help you. You can also call us at (864) 298-0500.