What is Denial of a Death Benefit
Every year, the III reports that less than 10% of life insurance policyholders have their claims denied. While this may seem like a high number, it's important to remember that most of these denials are due to legitimate reasons, such as the policyholder not paying premiums or committing suicide.
However, there are some cases in which the death benefit may be wrongfully denied. If you believe that your claim has been wrongfully denied, you may be able to appeal the decision or file a lawsuit.
The death benefit of a life insurance policy is the amount of money that will be paid to the policy's beneficiaries upon the policyholder's death.
Normally, the death benefit is paid out relatively quickly after the policyholder's death. However, in some cases, the insurance company may withhold payment until they have investigated the circumstances surrounding the policyholder's death.
The Death Benefit Denial Circumstances
There are a few different reasons why an insurance company may deny a death benefit claim. The most common reasons are listed below.
- The policyholder failed to pay premiums: If the policyholder fails to pay their life insurance premiums, the policy will usually lapse. A lapsed policy will not pay out a death benefit, even if the policyholder dies.
- The policy was cancelled: If the policy was cancelled by the policyholder or the insurance company, it will not pay out a death benefit.
- The policyholder committed suicide: Most life insurance policies have a clause that excludes suicide from coverage. This means that if the policyholder dies by suicide, the death benefit will not be paid.
- The death was due to non-negligence: If the policyholder dies in an accident, the death benefit will usually be paid. However, there are some exceptions, such as if the policyholder was participating in a dangerous activity at the time of their death. Failure to take reasonable care of one’s life leads to a non-negligence issue, and may result in claim denial.
- If the policyholder died from a natural cause: If the policyholder dies from natural causes, the death benefit will usually be paid.
Is a Death Benefit of a Life Insurance Policy Worth It?
A death benefit can be a valuable asset for your loved ones. The idea is to help your siblings, spouse, children, or more cover any costs, debts, or expenses that you may have incurred, or ones that they will in your memory. However, it's important to remember that the death benefit is not always paid out.
If you're considering purchasing a life insurance policy, be sure to read the fine print and understand the policy's terms and conditions. This will help you avoid any surprises down the road.