When a life insurance claim is denied, beneficiaries are left confused, frustrated, and financially vulnerable. Denials can stem from alleged misrepresentations, missed payments, exclusions, or disputes over beneficiaries. Understanding why insurers deny claims—and how to fight back—is critical. Below are the top 25 most important questions and answers related to denied life insurance claims, helping you navigate the process and protect your right to benefits.
1. What are the most common reasons life insurance claims are denied?
Life insurance claims are often denied due to alleged misrepresentations on the application, a lapse in the policy from non-payment of premiums, death during the contestability period, suicide exclusions, illegal activity, or disputes over who the rightful beneficiary is. Other common issues include paperwork errors, policy exclusions, and employer mistakes with group coverage.
2. What is a material misrepresentation in a life insurance application?
A material misrepresentation is a false or omitted statement that could have influenced the insurer’s decision to issue the policy. If the insured failed to disclose a serious illness, risky hobby, or smoking history, the insurer might argue they would have charged a higher premium or denied coverage altogether. If discovered during the contestability period, such misstatements can lead to a claim being denied or the policy being rescinded entirely.
3. Can a life insurance claim be denied after the policy has been in effect for over two years?
After two years, the contestability period generally expires, meaning insurers can no longer void a policy for misstatements unless they can prove intentional fraud. However, claims may still be denied for other reasons, such as death excluded under the policy’s terms or unpaid premiums.
4. What is the contestability period and why does it matter?
The contestability period is a two-year window during which the insurer can investigate and deny claims based on misrepresentations or omissions in the application. During this time, insurers often scrutinize medical records and other information. Once this period ends, denial is much harder unless there is fraud.
5. What happens if the policyholder dies shortly after reinstating a lapsed policy?
When a lapsed policy is reinstated, a new contestability period usually begins. If the policyholder dies shortly after reinstatement and the insurer finds inaccuracies in the reinstatement application, it may deny the claim, treating it as a new policy subject to the two-year review window.
6. Can a life insurance claim be denied due to a suicide?
Most life insurance policies contain a suicide clause that allows the insurer to deny the claim if the insured dies by suicide within the first two years of the policy. After that period, suicide is generally covered, and the insurer must pay the death benefit.
7. Can an insurer deny a claim for a death that occurred during illegal activity?
Yes, many life insurance policies include exclusions for deaths occurring while committing a crime or engaging in unlawful activity. If the insured died in the course of an illegal act—like evading police or driving under the influence—the insurer may attempt to deny coverage.
8. Can missed premium payments result in claim denial?
If the policyholder misses a premium and doesn’t make the payment within the grace period (typically 30–31 days), the policy can lapse. If death occurs during the lapse, the insurer may deny the claim. However, some policies offer reinstatement provisions or automatic premium loans that could preserve coverage.
9. What if the policy was paid up but the insurer says it lapsed?
Occasionally, insurers claim a policy lapsed when it was actually paid up or eligible for premium loans. If the insurer failed to send proper lapse notices or applied payments incorrectly, the claim may have been wrongly denied. Reviewing payment history and policy terms is essential.
10. How do beneficiary disputes affect claim payouts?
When multiple parties claim to be the rightful beneficiary, or if there are questions about the validity of a beneficiary change, the insurer may delay or deny the payout. In such cases, insurers often file an interpleader lawsuit, placing the money with the court until the dispute is resolved.
11. Can an ex-spouse collect on a life insurance policy after divorce?
In many states, laws automatically revoke an ex-spouse as a beneficiary unless the policyholder reaffirms the designation post-divorce. However, these state laws may not apply to policies governed by federal law, such as employer-provided life insurance under ERISA, where the named beneficiary often remains entitled.
12. Does community property law affect life insurance payouts?
In community property states, a spouse may be entitled to half of the policy proceeds if premiums were paid with community funds. Even if someone else is named as beneficiary, the spouse might still have a valid legal claim to a portion of the death benefit.
13. Can group life insurance claims be denied more easily than individual policies?
Group life insurance policies, especially those governed by ERISA, come with stricter procedural requirements and limited legal remedies. Denials may occur if the employer failed to properly enroll the insured or premiums weren’t paid, even if the employee believed they had coverage.
14. What if the insured was never properly enrolled in a group life policy?
This is a common reason for denial. If an employer promised coverage but failed to complete the paperwork or pay premiums, the insurer may deny the claim. However, legal action can often hold the employer accountable for negligent handling of benefits.
15. How can a beneficiary prove the claim was wrongfully denied?
A beneficiary should obtain the denial letter, request a complete copy of the policy and application, and examine the stated reason for denial. Discrepancies in the insurer’s reasoning, incomplete investigations, or procedural errors may reveal a valid basis for overturning the denial.
16. What is bad faith in a life insurance claim denial?
Bad faith occurs when an insurer denies a claim without a reasonable basis, fails to investigate properly, delays unreasonably, or misrepresents policy terms. In bad faith cases, courts may award extra damages beyond the death benefit, including punitive damages and attorney fees.
17. What should a beneficiary do immediately after a claim denial?
The first step is to request a detailed explanation in writing. Next, gather all policy documents, communications, and medical records. Then consult with a life insurance lawyer to determine whether to file an internal appeal or take legal action.
18. Can a life insurance claim be denied due to medical malpractice?
Some insurers may argue that death from a medical error was due to a pre-existing condition or an undisclosed illness. However, malpractice is not a valid ground for denial. A skilled attorney can challenge such attempts to avoid payment.
19. Can policies be rescinded after the insured’s death?
During the contestability period, insurers can rescind a policy—voiding it as if it never existed—if they find misrepresentations. After the two-year window, rescission is only allowed in rare cases where fraud is clearly proven.
20. Is a life insurance denial final?
A denial is not the end of the road. Policies governed by ERISA require an appeal within a specific time frame. Outside ERISA, beneficiaries can file lawsuits in state or federal court. Many claims are approved only after legal pressure is applied.
21. How long do I have to challenge a denied life insurance claim?
Deadlines vary depending on the type of policy and applicable law. For ERISA policies, appeals are typically due within 180 days. State law claims may have a statute of limitations ranging from one to three years. Acting quickly is essential to preserve your rights.
22. What is an interpleader in a life insurance case?
An interpleader is when the insurer cannot determine who should receive the benefits and deposits the funds with the court. The beneficiaries must then litigate the matter, and the insurer is removed from the dispute. Legal representation is crucial in these cases.
23. Can life insurance be denied for alcohol or DUI-related deaths?
Some policies exclude deaths caused by intoxication or DUI. However, insurers must prove the death resulted directly from intoxication. If alcohol use wasn’t the proximate cause, or if the exclusion is unclear, the denial may be successfully contested.
24. Does accidental death coverage increase the chance of denial?
Yes, accidental death riders come with stricter standards. Insurers often deny these benefits by claiming the death was due to illness, suicide, or another excluded cause. Careful review of the rider’s wording is necessary to challenge these denials.
25. Should I hire a lawyer to fight a denied life insurance claim?
Absolutely. Insurers rely on complex legal language and procedural rules to avoid payment. An experienced life insurance attorney can identify weaknesses in the denial, handle appeals, and file lawsuits when necessary to recover the full benefit owed.
If your life insurance claim has been denied, don’t give up without a fight. Insurers count on beneficiaries being confused, intimidated, or unaware of their rights. A knowledgeable life insurance attorney can help you review the policy, gather evidence, and take decisive legal action. Whether you’re dealing with an employer-sponsored plan, a private policy, or a complicated beneficiary dispute, legal guidance can make the difference between a denied claim and a successful payout.