When Are Denied Life Insurance Claims Valid?
Some denied life insurance claims are valid, and these may be difficult or impossible to contest in mediation or court. Because a life insurance policy is a legally binding contract, you have to follow the letter of the law and the detailed stipulations of the policy. That means reading and understanding the small print and making sure you do everything correctly when you apply for a policy. In many cases, valid claims denials are based on errors by the individual who applied for the policy. Read about death claims
Denied Life Insurance Claims That Are Valid
There are several valid reasons for denying a life insurance claim from a beneficiary, including:
Disclaimer Clauses
Life insurance pays when the insured passes away, but when you read the fine print, you’ll discover that most policies have a two-year disclaimer. This means that if the insured dies before two years is up, the company doesn’t have to pay. Pre-existing conditions can also be disclaimers. For instance, if you apply for the insurance knowing you have a brain tumor already, no matter when you die, the company doesn’t have to pay.
Incomplete or Inaccurate Information
You’ll need to fill out detailed paperwork when you apply for insurance. Many denied life insurance claims are the direct result of someone either not providing all necessary information to the insurance company or providing information that is inaccurate or just plain wrong. If you have a pre-existing health condition and don’t include that in your application, when you die, your beneficiary will probably receive nothing at all because you lied about your health. Examples of this include not revealing mental illness, issues with depression, a heart condition, etc. Even if these conditions aren’t directly related to the cause of death, many companies will use your lack of honesty to deny your beneficiary’s claim. Never leave out information!
Policy Exclusions
While there aren’t as many policy exclusions as there used to be (exclusions for dying while participating in a dangerous sport such as rock climbing or dying while at Spain’s “Running of the Bulls”), there are still a few. The most common policy exclusion for denied life insurance claims is suicide. If the insured individual takes their own life, the policy is null and void in the first two years after the policy was purchased. Some insurers won’t pay proceeds for any suicide at any time, but that is rapidly changing. Ask an insurance attorney what the current guidelines are to be sure.
Keep in mind that if there are policy exclusions and you decide to purchase a larger policy or a different kind of policy at any point, the two-year clock starts again at day one. If six months later the policy holder dies, the company can deny the claim because of the two-year rule, even if he owned another policy for five years before that with the same company.
Lapsed Policies
If you fall on hard times and can’t pay your premiums, contact your insurance company right away. Letting it go and simply missing a few payments is a bad idea. Some companies have denied life insurance claims because just one premium payment was missed. It’s perfectly legal, and part of the contract, so ask questions; ask for an extension, but ask for it in writing in order to protect yourself. If the reason your policy lapsed is because of the insurance company’s error or negligence (not sending the invoices to the right address, failing to notify you with a grace period if you’ve fallen behind), a life insurance attorney may be able to help.
Five Ways to Ensure Your Life Insurance Claims Aren’t Denied
Keep these tips in mind any time you fill out an application for life insurance to avoid a claims denial in the future:
- Don’t be deceptive.
- Don’t guess – call the doctor to get accurate health information
- Ask questions if you don’t understand part of the application
- Have a life insurance attorney review your policy for any exclusions or red flags
If you’ve already been denied a life insurance claim, call an attorney skilled in handling life insurance issues right away. The sooner you call, the sooner you’ll know whether your denied claim can be contested.