Life Insurance

Can Life Insurance Claim Be Denied

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 8 minute read

When someone you care deeply about dies, you are never ready. If you’re the beneficiary of a life insurance policy, you may be able to utilize the policy’s tax-free earnings to help with final expenses, debts that continued on after their death, and replacing lost income, but only if the insurance company agrees to pay the claim.

Indeed, the vast majority of death claims submitted to life insurers are approved. It doesn’t take all of them, and the procedure isn’t simple. 

Life insurance claims are often denied by insurers for a wide variety of reasons, some of which are quite reasonable such as unpaid premiums or early suicide, and others which are less so. 

If the insurance company representing your loved one rejects your claim, you will need to weigh your choices and determine what to do next.

How to Proceed If Your Life Insurance Claim Is Rejected

Losing a loved one is devastating enough as it is. A refused life insurance claim, if left neglected, can be equally life-altering monetarily. To your relief, not all cases of life insurance rejection are irreversible. You have the right to appeal the insurer’s decision, and if you can make a strong enough argument, you might succeed in having it overturned.

You can review your denied claim and file an appeal by following these instructions:

1. Study the Common Reasons for Life Insurance Claim Denial. Insurance companies for life reject claims

If a claim is denied by a life insurance company, they would normally send a formal letter to the beneficiary. Your loved one’s insurer may also notify you of the loss via encrypted electronic message if you set up an online account to file claims.

If you don’t get a formal notice, ask for one. Please read this entire text carefully. If the insurance denies your claim, they should provide you with a good reason why.

The key is to figure out why the request was turned down. You may have a solid case on appeal, or there may be little you can do to sway the insurer’s decision. These are only a few of the most typical explanations for why a life insurance company can refuse to pay a claim.

The Policy Became Void for Failure to Pay

A life insurance company has the right to reject an otherwise valid claim for nonpayment. The insurance company is well within its rights to terminate coverage if the policyholder fails to make payments on the policy and restore it within the grace period, which is usually between 30 and 45 days from the day the last payment was due.

If you don’t have access to the policyholder’s online account or other documentation of cancellation, such as a letter from the insurer, you won’t know that this has occurred. However, the policy’s expiration date should be stated explicitly in the insurer’s refusal letter.

The Term of The Policy Ended

Another simple explanation for a denied life insurance claim that will likely leave you with no options is if you outlive the policy’s term. For example, if your deceased loved one had a 20-year term life insurance policy and lived another 25 years after it became active, the policy would have already expired.

Insufficient Death Documentation

A death certificate must be filed for every death that occurs in the United States. Typically, death certificates are issued by state record offices soon after a death is reported by a hospital, medical examiner’s office, or other approved agency.

The process of creating a death certificate can be lengthy and is only necessary for rare circumstances. If the policyholder passed away while traveling, for instance, it would be more difficult to properly disclose and document the death. 

Those who mysteriously vanish face the same fate. It’s more complicated to pronounce death if there are no physical signs of it left behind. In any case, the life insurance company will want a certified copy of the death certificate before paying out a claim. 

If you forgot to include it the first time, resubmitting it with your appeal should take care of the problem. You may need to submit further proof, such as a medical examiner’s report, if the validity of the death certificate is contested or if one cannot be obtained.

On the life insurance application, the policyholder made a false statement.

The life insurance company may opt not to pay the death benefit if they discover the insured is misled on the application. You may still receive some of your premium money back, but it will likely be far less than you were anticipating.

During the contestability period, which lasts two years from the policy’s effective date, the insurance company can investigate the policyholder’s application in further detail.

Even if the insurer has no basis to suspect fraud, it may nonetheless conduct an investigation into the policyholder’s application and the circumstances of death throughout the contestability period. 

Investigations like these frequently reveal evidence of fraud or deception, leading to claims being refused. Payments are typically held up for a few weeks or months, and that’s in the best-case scenario.

Some things that can be left out or lied about that could affect a life insurance claim are:

  • Keeping secret a potentially fatal health issue
  • Covering up a harmful behavior, like smoking,
  • Omitting information on a potentially hazardous profession or pastime, such as working as a wildland firefighter or hang gliding, might have serious consequences.
  • The failure to reveal prior convictions for potentially dangerous acts, such as driving while intoxicated or recklessly, is a serious red flag.

Material misrepresentations refer to such omissions. They can lead to a claim denial even though they had no bearing on the policyholder’s cause of death, because the insurer may have declined coverage had it known the full extent of the policyholder’s risk profile when it initially considered the application.

The Policy Did Not Include the Death’s Cause

Life insurance policies may not cover deaths caused by certain events, such as those received in war, extreme sports, or unlawful activities. The insurer is within its rights to deny a claim if the policyholder died from a covered peril that is excluded from the policy.

A suicide clause in a policy often allows the insurer to reject a claim if the insured dies by suicide during the first two years. The insurance company is likely to reject your claim if your loved one committed suicide 18 months after the policy went into force.

2. Collect Evidence

There is little you can do if the insurance expired a long time ago because of the policyholder’s death or because of nonpayment of premiums months or years earlier. The insurer has no responsibility to pay the death benefit because the policy has expired.

You may be eligible for a refund of the policyholder’s premium payments if a return of the premium rider was included in the policy. However, that’s all you can count on.

You may have a case for an appeal if the policy was still active at the time of the policyholder’s death. However, you will need to collect evidence to support your claims.

The evidence may consist of, but is not limited to:

  • Record of the policyholder’s health and death
  • Consistent findings from a reputable autopsy
  • Report from law enforcement indicating whether or not they conducted an investigation into the death.
  • Provide as much evidence of past policy payments as you can, such as invoices and bank statements.
  • A copy of the death certificate that has been certified by an official agency.

A restricted time frame may exist for filing an appeal, depending on the deceased’s policy. Denial of a group life insurance policy claim, for instance, may not be appealable after only 60 days.

3. Object to the Rejection

You then need to file your appeal. No money will be spent if you do it yourself. To file an appeal, you must contact the claims department of your life insurance provider. They’ll provide you instructions on how to file a claim, such as a phone number to contact or a link to the company’s online claims portal.

Include any and all evidence you have gathered in support of your appeal, regardless of whether it was included in your original submission or not. There’s no guarantee the insurer will merge your claims, and if they don’t, you could be left with a partially paid claim. A second rejection may result from that.

4. If Required, Involve a Third Party

When you file an appeal, the insurance company will look over the new details to see if it made a mistake when initially rejecting your claim. If this is the case, you can look forward to hearing that your claim has been accepted and the death benefit will be deposited into your bank account shortly.

If the insurance company persists in refusing to pay, though, what then? Or maybe you think you’re going to need more help, so you decide to wait until after your appeal has already been filed to get that.

You can either go to the insurance department of your state to register a complaint or ask for help, or you can contact a private attorney that focuses on cases involving life insurance denials.

Call the Insurance Department of Your State

Call the insurance regulator in your state if you feel your life insurance company has acted fraudulently in rejecting your death claim. This organization, which is sometimes called an insurance commission, is responsible for safeguarding the financial interests of policyholders and insurers.

If you have a complaint, you should be able to submit it online. A case manager will get back to you at some time to learn more and go over the next actions.

No promises, though; this won’t be solved overnight. It could take months or even years for your state’s insurance department to settle your complaint because of the high volume of complaints they receive. 

In the event that your grievance serves as the foundation for or is merged into existing litigation against the insurance company, a resolution may be years away.

Work with a life insurance attorney

Hiring an insurance attorney who focuses on challenging life insurance claim denials is an alternative to, or in addition to, filing a complaint with your state’s insurance commission. 

They will assist you in drafting and submitting your appeal, will handle all communication with your insurer, and will attempt to negotiate a favorable outcome on your behalf. While legal representation is no guarantee of victory, it does increase your chances. 

However, you will have to pay for their services; the majority operate on contingency, which means they will take between 33 and 40 percent of your settlement.
If they are unable to overturn the denial, they will not be compensated.

Bottom Line

Life insurance is important for many people in their working years. You and your significant other may have purchased a policy because your financial stability would be jeopardized without the death benefit in the event of your untimely demise.

This sense of security is snatched away when a life insurance claim is rejected, adding stress to what is already likely to be a difficult time. The good news is that you can appeal a life insurance claim denial, and while victory is never guaranteed at this stage, it does happen frequently.

Let’s hope you’re one of the lucky few recipients who have no trouble submitting a life insurance claim when the time comes. However, it is comforting to know that other choices are available.

Curated posts

Someone from Raleigh, NC just viewed Best Online Colleges for Creative Writing