Common Justifications for Denied Life Insurance Claims
It’s important to understand that "justifications" for denying a claim aren’t always the same as the actual reasons behind the denial. Often, life insurance companies may claim they are denying a claim for a valid reason, but in many cases, the real motivation is simply to avoid paying out a significant benefit.
Unlike many industries where businesses thrive on customer satisfaction, life insurance companies profit by maximizing premiums received and minimizing the amount they pay out in claims. In 2015 alone, U.S. insurers took in $638 million in life insurance premiums but only paid out about $264 million in benefits.
Here are some of the most common justifications offered for denying life insurance claims:
1. Material Misstatement
A material misstatement occurs when the insured provides false information that affects the policy’s terms. For example, if an applicant fails to disclose a pre-existing medical condition on their application, the insurer may use this as grounds to deny the claim. However, life insurance companies sometimes try to deny claims based on misstatements that are minor or irrelevant, such as forgetting to mention a tetanus shot that had no impact on the insured’s health or death.
2. Policy Exclusions
Some life insurance policies, such as accidental death and dismemberment (AD&D) policies, may exclude certain causes of death. For instance, AD&D policies typically do not cover suicides or deaths resulting from certain activities. Disputes over whether a death was accidental or a suicide can complicate the claims process, especially if the insurer suspects fraud or if the cause of death is unclear.
3. Suspicious Timeline or Circumstances
Insurance companies may delay a claim by asserting that the circumstances of death are suspicious. For example, if the insured purchased the policy shortly before passing away, the insurer might claim fraud or question the validity of the death.
4. Lapsed Policy
A lapsed policy is another common reason for claim denial. Insurance companies may deny claims if premiums were not paid on time. However, grace periods exist for missed payments, and if premiums were paid within this period, the policy may still be valid. In some cases, legal avenues may be available to contest a policy lapse and recover benefits.
Life Insurance Claim Denials Aren’t Final
It’s important to remember that a life insurance claim denial is not necessarily the final word. Many insurance companies hope that beneficiaries will give up after receiving a denial, ultimately saving the company money. The insured may have paid premiums for years, only to have their family be denied the benefits they were entitled to.
If you’ve received a denial or are experiencing delays in processing your claim, it’s crucial to seek legal advice and pursue your claim further. You don’t have to accept the insurer’s decision at face value.
Talk to an Experienced Life Insurance Denial Attorney
Our life insurance lawyers have a proven track record in handling denied life insurance claims and ensuring that beneficiaries receive the benefits they are owed. If your family has experienced the emotional and financial stress of a denied claim, we can help you navigate the appeals process. Schedule a free consultation today to discuss your case and find out how we can assist you in securing the benefits your loved one intended for you.