What you don’t know can hurt you. Read about denied ERISA claims
Life insurance policies are one of those things many consumers don’t think a lot about. For many of us, the premiums are paid by our employer. Beyond participating in an initial application process, we really don’t question our policy language or coverages at all. That may be a mistake.
Nonetheless, it can be difficult for many people to examine their life insurance benefits – mainly because when they kick in, the policyholder will be deceased. Yet, because life insurance policies can fail for so many technical reasons, we think it is a good idea to know your coverage (and the exclusions) inside and out. And, in the event of an untimely death, your loved ones will be grateful that you took this additional step in providing for their future.
The last thing you want is for your beneficiary’s claim to be denied. Unfortunately, coverage denials based on technical or administrative mistakes happen all the time. In this article, we explore some of the most common reasons for these denials of coverage, as well as the steps you can take to avoid such traps.
Beware of the policy lapse
As noted above, it is commonplace for employers to provide life insurance as part of an employee benefit package. In such cases, the policyholder typically fills out an application on the first day of employment, possibly undergoes a physical examination by the insurer, and otherwise tends to forget about the coverage.
In today’s work environment, however, employees rarely stay with one employer for a significant number of years. Instead, they tend to move from job to job on their quest to meet important career goals. When it comes to life insurance though, this can be a trap for the unwary.
Generally speaking, your employer-sponsored life insurance policy doesn’t follow you to your next place of employment. Rather, the policy lapses when the first employer stops paying the premiums – which is typically right about the date of your departure.
If your new employer does not offer life insurance coverage, you can continue paying the premiums under the original plan. Be aware, however, that once you are out from under the former employer’s group coverage, premiums may be significantly higher.
If you don’t take over premium payments at the end of your employment, the policy will lapse. In the event you pass away following the last date of coverage, the insurer will deny any claims made under your policy.
Be sure to always have a designated beneficiary
This seems like an obvious point to most people. If you’re going to have a life insurance policy, you need to designate someone as your policy beneficiary in the event of your death. In some cases, however, maintaining a valid beneficiary is easier said than done.
Again, imagine that you’re receiving life insurance as part of an employee benefit package. Perhaps when you fill out the initial paperwork, you don’t have any children nor is there a significant other in your life. You don’t want to appoint just anybody, so you appoint nobody.
That’s all well and good unless you pass away before you’ve made the designation. In most instances, life insurance proceeds are not automatically distributed to your next of kin. Rather, they aren’t distributed at all. In that case, you (or your employer) may have made years of premium payments for nothing.
It is also critical to remember to change your beneficiary when your life circumstances change. Perhaps you designated your trusted girlfriend as the beneficiary at the outset of your policy. If the two of you later part ways, it’s a good idea to remove her as a beneficiary as soon as you break up. If you have to appoint a friend as a beneficiary for the time being, so be it. At least someone you love will benefit from all those premium payments.
Likewise, if you get a divorce, some state laws automatically revoke your former spouse as a beneficiary on your life insurance policy. If you don’t designate someone new, an insurer may decline any claim made against your policy.
Don’t skip premium payments
It can happen to all of us from time to time. Our expenses exceed our income and suddenly we find ourselves having to make difficult decisions about what bills we’re going to pay in a given month.
In these situations, it is easy to let the life insurance premiums slip. I mean, after all, none of us is expecting to die any time soon. When those premiums are competing for our dollars against things like groceries, health insurance, rent, utilities, and the like, it’s almost a no-brainer to skip the life insurance payment.
But what if the unthinkable happens? What if you pass away during a time when you’re behind in payments? Will your beneficiaries have their claim denied because you skipped a month or two?
Well, you better believe your life insurance company will try to deny the claim. Whether they are successful in that effort, however, is a game of inches. Generally speaking, courts have held that insurance companies must provide sufficient notice of non-payment and intent to cancel the policy before they can make an outright denial of death benefits.
Nevertheless, none of us knows when our time will come. If you’re considering which bills to pay when funds are tight, life insurance premiums should not necessarily go to the bottom of the pile.
What to do if a life insurance claim has been denied on a technicality
Insurance companies are notorious for finding any reason they can to deny a claim. Life insurers are no exception. To make matters worse, most insurance companies have an army of claims adjusters and lawyers who are just looking for reasons to deny coverage.
If you’re facing a claim denial based on one of these technicalities, don’t hesitate to hire a professional. Our team of lawyers has been laser-focused on life insurance claim denials for a number of years. We’re not intimidated by insurance companies and our track record proves it. We know when a denial is legitimate and when we should fight that decision with everything we’ve got.
Contact us today if you have a delayed or denied life insurance claim.