When a life insurance claim is denied, beneficiaries are often left confused, financially exposed, and unsure where to turn. Common denial reasons range from alleged misstatements on the application to policy lapses, suicide clauses, criminal activity exclusions, or contested beneficiaries. Understanding the reasons behind denials—and the legal remedies available—can make the difference between losing out and securing the benefits you’re owed. Below are the 25 most critical questions and answers about denied life insurance claims.
1. What are the most common reasons life insurance claims are denied?
Claims are often denied due to alleged material misrepresentations, missed premium payments, contestability issues, suicide within the exclusion period, death during criminal activity, or disputes over the correct beneficiary. Administrative mistakes, paperwork errors, and policy exclusions are also frequent factors.
2. What is a material misrepresentation in a life insurance application?
A material misrepresentation is an untrue or omitted fact that would have influenced the insurer’s decision to issue coverage. This includes failing to disclose smoking, health conditions, or hazardous hobbies. If discovered during the contestability period, it could void the policy entirely.
3. Can a life insurance claim be denied after the policy has been in effect for over two years?
Generally, after two years, insurers cannot rescind a policy based on misstatements unless they can prove fraud. However, claims may still be denied for exclusions or lapses in coverage.
4. What is the contestability period and why does it matter?
The contestability period is typically the first two years of the policy. During this time, insurers may investigate the application for misstatements and deny claims. After this period, they cannot rescind coverage except in clear cases of fraud.
5. What happens if the policyholder dies shortly after reinstating a lapsed policy?
Reinstating a policy usually triggers a new two-year contestability window. If the insured dies shortly after and the reinstatement application included inaccuracies, the insurer may deny the claim on those grounds.
6. Can a life insurance claim be denied due to a suicide?
Yes, but only if it occurs within the policy’s suicide exclusion period, typically the first two years. After that, suicide is generally covered, and the benefit should be paid.
7. Can an insurer deny a claim for a death that occurred during illegal activity?
Yes. Policies often exclude coverage for deaths occurring while committing a crime, such as during a robbery or while fleeing law enforcement. These exclusions are sometimes broadly interpreted by insurers.
8. Can missed premium payments result in claim denial?
Yes. If premiums go unpaid and the grace period (usually 30–31 days) passes, the policy may lapse. A death during a lapse may trigger denial, unless the policy was automatically reinstated or eligible for a premium loan.
9. What if the policy was paid up but the insurer says it lapsed?
Insurers occasionally claim lapses when they’re in error. If the policy was paid up or supported by automatic loans, or if lapse notices weren’t properly sent, the denial may be contestable.
10. How do beneficiary disputes affect claim payouts?
If multiple parties claim to be the rightful beneficiary, the insurer may file an interpleader lawsuit and deposit the funds with the court. This delays payment and requires a court to resolve the dispute.
11. Can an ex-spouse collect on a life insurance policy after divorce?
In many states, divorce automatically revokes an ex-spouse as beneficiary unless reaffirmed. But for ERISA-governed policies, federal law often requires the named beneficiary to be honored, even if it’s an ex-spouse.
12. Does community property law affect life insurance payouts?
In community property states, a surviving spouse may be entitled to half of the death benefit if premiums were paid with community funds—even if someone else is named as beneficiary.
13. Can group life insurance claims be denied more easily than individual policies?
Yes. Group policies, especially those under ERISA, have rigid enrollment and procedural rules. Mistakes by employers or premium issues often lead to denials that require legal intervention.
14. What if the insured was never properly enrolled in a group life policy?
This is a leading cause of denial. If the employer failed to submit paperwork or pay premiums, the insurer may refuse the claim, even if the employee believed they were covered.
15. How can a beneficiary prove the claim was wrongfully denied?
Obtain the denial letter and request the full policy file. Compare the insurer’s stated reason with policy terms, communications, and application details. Inconsistencies may support a reversal or legal claim.
16. What is bad faith in a life insurance claim denial?
Bad faith includes denial without proper investigation, failure to communicate, unreasonable delays, or misrepresenting policy terms. Courts may award punitive damages in such cases.
17. What should a beneficiary do immediately after a claim denial?
Request a written explanation, gather policy and application documents, and consult a life insurance attorney. Legal help can clarify whether to appeal, negotiate, or file a lawsuit.
18. Can a life insurance claim be denied due to medical malpractice?
Some insurers try to link death to undisclosed conditions if malpractice occurred. But malpractice is not a valid exclusion. A lawyer can fight such baseless denials.
19. Can policies be rescinded after the insured’s death?
During the contestability period, yes—if misrepresentations are found. After two years, rescission is rare and usually limited to provable fraud.
20. Is a life insurance denial final?
No. Beneficiaries may appeal or sue depending on the policy. Many claims are reversed through legal pressure or court intervention.
21. How long do I have to challenge a denied life insurance claim?
Time limits vary. ERISA appeals must be filed within 180 days. State law claims may have a statute of limitations between one and three years. Act quickly.
22. What is an interpleader in a life insurance case?
An interpleader is a legal action where the insurer deposits the benefit with the court because of competing claims. The court decides who receives the funds.
23. Can life insurance be denied for alcohol or DUI-related deaths?
Yes, if a policy includes an intoxication exclusion. However, the insurer must prove that intoxication caused the death. These denials are often challenged.
24. Does accidental death coverage increase the chance of denial?
Yes. Accidental death riders are narrowly interpreted. Insurers may claim the death was due to illness, suicide, or excluded causes. Legal review is essential.
25. Should I hire a lawyer to fight a denied life insurance claim?
Absolutely. Denials often rely on technicalities or misapplied policy language. An experienced attorney can dispute the denial, file suit, and recover the full benefit owed.
If your life insurance claim has been denied, don’t give up without a fight. Insurers count on beneficiaries being confused, intimidated, or unaware of their rights. A knowledgeable life insurance attorney can help you review the policy, gather evidence, and take decisive legal action. Whether you’re dealing with an employer-sponsored plan, a private policy, or a complicated beneficiary dispute, legal guidance can make the difference between a denied claim and a successful payout. When you need a California life insurance lawyer, we are here to help.