Insurance companies use many excuses as reasons for life insurance denial. Although some claims are legitimate, insurers often convince beneficiaries that a valid claim is denied for valid reasons. If you were a victim of a denied life insurance claim, it’s important to contact an attorney specializing in life insurance claims to help you with your case.
What are the Reasons for Life Insurance Denial?
After a person dies and a beneficiary files a life insurance claim, the claim can be paid, delayed, or denied. If the claim is paid, the beneficiary will usually have the option of receiving a lump sum payout or depositing the funds into a special account set up by the insurer. Many insurers either delay or deny claims, even after all necessary documents have been submitted by the beneficiary. Common life insurance claims denial reasons include:
Non-Payment of Premiums
Life insurance policies are only active as long as premiums are paid. If a payment is missed, the policy may lapse or terminate. Insurance companies often deny claims for non-payment of premiums and a lapse in the policy. A beneficiary should be aware of required 30-day premium-due notices that must be sent to the correct address, warning an insured of an impending lapse.
No Beneficiary on File
A life insurance claim may be denied if the policyholder failed to designate a beneficiary on the policy. State laws where the insured policyholder lives may influence how benefits are paid. When no beneficiary is named, insurance companies may delay or deny the claim, or pay benefits to the wrong person in some cases.
The Type of Death is not Covered
Life insurance companies use a variety of exclusions that focus on the type of death. Many exclusions include dangerous conditions or activities like skydiving, rock climbing, scuba diving, extreme sports, and notably suicide. If a person dies under these conditions, the claim will likely be denied.
Misrepresentations on the Policy
When a person applies for life insurance, he or she is asked to provide various personal information regarding age, income, health, weight, hobbies, criminal history, etc. If a person fails to answer questions honestly or omits required information, the insurance company may deny the claim.
The Death Happened During the Contestability Period
All life insurance policies have contestability periods. Typically, the period remains in effect for two years after the date the policy takes effect. If the policyholder dies within the contestability period, the insurer has the right to contest the claim during further investigation. Many insurance companies use contestability as an opportunity to deny a valid claim. Hiring an experienced life insurance attorney can help you get the money you need.
After a loved one has passed, the emotional toll it takes on the family and loved ones can be complicated and messy. Especially if your loved one has passed away and not notified the family of their final wishes or shared with them where vital documentation is, matters can become highly stressful and even more complicated.
Life insurance providers have contingencies built into their coverage to help them avoid coverage if they can. Each company will have its own process, and each police is unique. Policy delinquency, no beneficiary listed, the type of death is not covered, misrepresenting yourself on the application, or the death happening during a time period that was contestable are all reasons for a life insurance policy to be denied.
How to Protect Beneficiaries
When planning for the future of beneficiaries, there are a few simple steps that can be taken to help ensure that life insurance claims will not be denied.
Step one is to make sure the application was filled out honestly. Applicants and policyholders should not make any omissions or conceal any required information.
Next, policyholders may consider having their payments automatically paid. Having auto-payments set up may help prevent any unintentional, and potentially costly, lapses in coverage.
Keep all policy information up to date after any significant life changes (including contact information). Also, beneficiaries should know all vital information, including that there is a life insurance policy.
Policyholders should also make sure a trusted family member or representative knows where the policy is located, as well as other necessary documentation they might need to file a claim for benefits.
How Do Life Insurance Claims Work?
After a loved one has passed, the beneficiary is the one who will generally file the life insurance claim. Knowing what steps to take can help ensure you meet the necessary requirements and deadlines to receive the benefits your family member intended and paid to provide you with.
First, get in contact with the insurance company. An agent or representative will explain the carrier’s process for filing claims, including the types of documentation you may need to submit. Often, you will have to fill out certain forms, as well as submit a certified copy of the death certificate.
Once the necessary forms and documentation are submitted, the insurance company will review your claim to make a determination.
Some insurers commonly will delay payout or even deny claims, even if all the paperwork is in order and submitted within the necessary timeframe. Typically, you should receive a decision within 60 days of filing your claim.
What to Do If Your Insurance Claim Is Denied
Receiving a denial letter from your loved one’s life insurance company may seem overwhelming during an already emotional time. A denial doesn’t necessarily mean the end of your case, however.
Along with a denial for benefits, you should receive an explanation from the insurance company, as well as information for the appeal process. In some cases, submitting additional documentation may provide the support needed to approve your claim. Some of the documents you may need to submit include:
- Medical records for the decedent
- The autopsy report
- Financial statements showing proof of premium payments without lapse
If unable to reach a resolution with the insurance company, you may choose to file a formal claim with the Nevada Division of Insurance, or a civil lawsuit to recover the benefits you are due. The division will investigate the reasons for life insurance denial, and may take actions against the company if it finds evidence of wrongdoing.
Filing an Insurance Bad Faith Lawsuit
You can file a lawsuit for insurance bad faith if the life insurance carrier does not pay out the benefits without valid reason. You may work with a life insurance lawyer to provide evidence showing that your claim was denied in bad faith, and in some cases, to establish a history of making similar denials in order to avoid paying out benefits to beneficiaries.
The damages you can recover through a bad faith lawsuit include the policy payout you should have received, as well as damages for mental suffering and distress caused by the invalid denial of benefits. You may also get compensation for your associated legal fees.
In some cases, you can also receive punitive damages. The court will award this type of compensation in cases when it finds the defendant acted willfully and maliciously.
Lawsuits for insurance bad faith have a four-year statute of limitations. You must initiate your action within four years of the date of the insurance carrier’s breach of the policy. If you do not file your lawsuit in that time frame, the court can dismiss your case. Missing the deadline may cost you the right to obtain the policy benefits you need and deserve, as well as to hold the company responsible for using invalid reasons for life insurance denial.