It’s amazing that some people invest more money insuring their smartphones than they spend insuring their lives. Life insurance is a necessity because funeral expenses can create an incredible burden for the families of the deceased.
However, an unpaid life insurance claim is enough to leave anyone wondering why life insurance claims sometimes get denied?
Will My Claim Be Paid?
In most instances, the answer to this question is yes. However, there are instances when claims are denied. This is why it’s important to read the fine print and truly understand the conditions of the policy.
For instance, some companies require the policy to be at least two years old before the claim can be paid without issue. This is known as the the contestability period, but it doesn’t give the insurance carrier the right to automatically deny a claim. However, the insurance company will usually investigate the application if the deceased held the policy for less than two years.
The insurance company can deny the claim for any false information on the application, even if it was unrelated to the cause of death. This is known as material misrepresentation, and it’s one of the main reasons insurers deny relatively new claims. This is why it’s best to be honest during the application process. It’s better to pay a higher monthly premium now than to have the claim denied later.
When Is Life Insurance Denied?
The number one cause of a denied claim is missed payments because an insurer has no requirement to pay on a policy that has lapsed. Fortunately, the company is required to wait thirty-one days before canceling a policy for non-payment.
Even after a policy has lapsed, there are proactive steps available to the insured party. Each insurance company has a different reinstatement process, so it’s important to understand it before choosing a carrier.
Outside the Scope of Coverage
Fortunately, most insurance companies are phasing out exclusions, but there are still a few that remain. Few companies will pay a policy if the deceased committed suicide within the first two years, for example.
Other exclusions include death during the commission of a felony, acts of war, and dangerous hobbies such as skydiving. They may also deny a claim if the deceased passed away in a plane crash or from a serious disorder such as HIV.
Insurance carriers require the family of the deceased to provide a litany of paperwork. While it’s rare, there are people who try to collect on a policy while the insured party is still alive and the insurer is trying to prevent fraud. Unfortunately, this can be a difficult time for the family, and they may not provide the information in a timely fashion. Most insurance companies pay the benefit within sixty days of receiving all the necessary information.
Having life insurance denied can be particularly frustrating because the family is already in turmoil from the loss. Fortunately, life insurance claims are denied far less frequently than other insurance policies. It’s important to find out why the insurance company is denying the claim and address the issue, contacting an insurance denial lawyer if necessary.