Corporate-owned or key person life insurance is a life insurance coverage provided to the top directors, executives, proprietors, partners, and other key staff members of an organization.
As the beneficiary of a corporate-owned life insurance policy is the business itself, the corporation that purchased the policy gets the payout directly. A major employee's death in a company frequently results in a loss of business, possibilities, and revenue. Recruiting and training staff replacement might lead to significant corporate expenses. So, it should come as no surprise that having corporate-owned life insurance on the top paid directors and officers is a normal practice for many firms that a lot of investors now anticipate.
It is reasonable to expect the insurance company to honor a corporate-owned life insurance claim once it issues an insurance plan and receives premiums from an organization. Afterall, the very purpose of such coverage is to protect businesses from the financial consequences that may occur due to an executive's death.
However, for a number of different reasons, insurers frequently reject these insurance claims and decline to pay the coverage. Coverage exclusions, contestable claims, fraud, and terms violation are some of the most frequent causes of corporate-owned life insurance claim rejection or delay.
An experienced corporate-owned life insurance attorney can assist a corporation in determining if their claim has been unjustly delayed or denied and if it is possible to recover it in court.
Fortunately, almost all states now have designated laws in place to safeguard corporations from the insurers refusing to payout a corporate-owned life insurance.
Contestability Clause
One of the most frequent justifications given by insurers for delaying and rejecting claims is contestability.
If a claim is made when the insurance has not been effective for over two years, it is considered contestable. The contestability clause is a common feature of nearly all life insurance contracts, and not just corporate-owned life insurance coverages.
According to this clause, the insurer is entitled to look into the medical background, history, and other information provided on the policy form of the insured if they pass away within two years of the business purchasing the life insurance policy on them.
It is likely for a corporate-owned life insurance coverage to get rejected by the insurer if it turns out that certain data was either not disclosed or misrepresented.
Not every claim is incorrectly rejected
An attorney who handles corporate-owned life insurance can assess your claim if it was rejected because of contestability and let you know if the corporation's claim was legitimately rejected.
A corporate-owned insurance lawyer will look into the details of the rejection, review the relevant documents, go through the life insurance policy application and assess any claimed misrepresentations to see whether they were significant to this specific insurance provider.
Get in touch with a life insurance lawyer for advice today if your corporate-owned life insurance payout has been rejected. Our lawyers fight and win these cases.