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Why Do Life Insurance Claims Get Denied?

Life insurance is a great option to provide a security for your family. The money is used for paying off any debt (like student or mortgage loans) as well as to fund funerals or even to provide an inheritance.

Life insurance is a great way to give you peace of mind, you’ll be wondering how many life insurance claims are denied and leave the beneficiaries with nothing. It’s a horrible idea, but it’s not something that you need to worry about. It’s because only a few life insurance claims actually get rejected.

“Life insurance companies pay for the majority of claims,” says Whit Cornman as spokeswoman for the American Council of Life Insurers (ACLI) which is an industry association. Cornman states there was less than 0.5 percent in claims (measured by the face value of the policy) could be disputed as of the year’s end in 2019.

Although the chances of the denial of a declined life insurance claim are low however, you must be aware of the things that could result in a claim being denied on disputed territory.

Failure to divulge a medical Condition or other pertinent information

If you are applying for life insurance it is mandatory to declare any medical conditions or other risk factors that could be a factor, for example, dangerous activities (like jumping off of a skydiver). If you do not provide exact information when applying and the insurance claim may be rejected in the future. It’s because your the life expectations (called mortality in the insurance industry) is the base to determine the life insurance underwriting class. Medical conditions are a major factor that affect rates.

Inability to disclose relevant details in the application process for life insurance is regarded as to be a “material mistake.” This is the use of a misleading or false assertion, or the absence of relevant specific information. A material error can affect the insurer’s ability to offer the most accurate rates. In some instances, a misrepresentation implies that an application has been accepted, but would otherwise be refused.

Here are a few examples of the information you must typically provide on the application for life insurance:

* Medical background. The information includes health issues as well as mental health problems prescription history and health history of the family (parents and children).

* Risky hobbies. This includes things like mountain climbing, car racing and skydiving.

* Risky behaviors. This includes smoking cigarettes as well as criminal records. There are also risky driving behavior like DUI convictions and other traffic offenses.

* Hazardous jobs. Construction workers and active military personnel police officers, firefighters and pilots may be subject to higher life insurance premiums.

Life insurance policies are known as an “contestability period” that is usually two years where the life insurance company has the ability to challenge or dispute the validity of a claim. The two-year time frame begins at the time of the date of the issue on the insurance policy.

The insurer may request medical records as well as other documents in order to examine their authenticity for evidence of significant misrepresentation in your life insurance claim.

If your insurance company finds any evidence of materially false representation, the policy could be canceled and your beneficiary won’t be eligible for the death benefit.

Insurance companies have a variety of methods to confirm the information you submit in an application.

Life Insurance Premiums were Not Reimbursed

In certain cases, beneficiaries may attempt to claim, but they don’t realize that you haven’t paid your premiums prior to your the date of death.

If you’re in the process of falling in debt on the life insurance payment You may be able to get your life insurance payments back on track depending on how in the red. The majority of life insurance policies offer either a 30 or 31-day grace period following that date. You are able to make the balance without incurring interest. If you die within this grace period the beneficiary will still receive an inheritance, less the premium that is due.

If your insurance policy has been cancelled because of non-payment, you might be able to reinstate the life insurance that has expired by paying the past due premium, plus interest. The requirements for reinstating the policy can differ based on the state and company. For instance in Texas the majority of life insurance companies will allow you to renew an insurance policy in a five-year period, but you will need to answer additional health questions or pass another medical exam for your life insurance.

In the event of a term life insurance policy

If you’re a holder of the term insurance for life, it may be able to outlive the term of the policy which means there will not be a death benefit payout.

If you require a longer period of protection, your policy may permit renewal (at the higher cost) at the expiration date of the time. You might also be able to change a term life insurance policy to a life insurance policy however there is a that you can do it. You should be aware of the deadline for your policy if you’re considering converting it.

A Suicide Death

Life insurance policies typically include a “suicide clause” usually lasting for two years. If someone dies within this period the insurance company typically will not pay out. Instead, it will reimburse all premiums back to the person who was insured.

Making an Life Insurance Claim

For a smooth claims process, it’s crucial to inform your beneficiaries the location where the life insurance coverage is according to Cornman from the ACLI.

Cornman suggests keeping the policy alongside other financial documents, legal documents or any other place your beneficiaries could check if they have to make claims. Cornman says that you must keep the name of your life insurance agent and contact details readily available.

If you’re a beneficiary, this is how to file an insurance claim.

When a life insurance claim gets rejected the beneficiaries must request an official denial of claim in writing. If they wish to contest this decision they must collect the required documents and evidence to back the claim. If they are unable to resolve the issue with the insurance company then they must seek out the state’s department of insurance for additional advice.