Life Insurance Claim Denied: Is The Death Benefit Always Paid?

life insurance claim denied

Life insurance gives peace of mind to a family. Until you’re left with a life insurance claim denied. This causes even more grief after a loved one’s death. Will this happen? Can a life insurance claim be denied? It can. 

Something as little as missing a few payments will cancel out years of paying for life insurance. This mother died of colon cancer. She had a life insurance policy to make sure that her children could pay for college. After she died, the claim was denied. It turns out she had missed payments while she was lying sick in a hospital bed. 

Luckily a lawyer found a clause in the policy. In the event of the insured being sick and unable to work, they wouldn’t need to pay premiums. So in this case the death benefit was still paid. But let’s look at some more common situations where a life insurance company may deny a claim. 

Common Reasons Why A Life Insurance Claim Is Denied

While it’s not common for a life insurance company to deny a claim, when it does happen, it’s likely to be for one of these reasons. 

The Insured Died During The Contestability Period

Contestability means something is debatable. If information is unclear or inaccurate, this means it’s contestable. 

The contestability period with insurance is typically a two-year period from when the coverage begins. If the insured dies during this period, a company will check for tiny discrepancies in the insured’s application. Then, if they find something to be inaccurate, you’ll be left with a life insurance claim denied. 

During the contestability period, the misinformation doesn’t need to be related to the death for the company to deny the claim. For example, if the misinformation was health-related but you died in a sudden accident. 

Failing To Disclose Important Information When Applying For Coverage

In most situations, failing to disclose information on your application will only lead to a life insurance claim denied during the contestability period. However, there are some claims that get denied for this reason after. Especially if the misinformation was intentional. 

These are some examples of hidden information that could lead to a life insurance claim denied.

  • Hiding convictions for driving while intoxicated.
  • Not disclosing past medical diagnosis.
  • Dishonesty around family’s medical history.

There can be minor instances of misinformation such as dates of doctor appointments or a mistake with the address. These are unlikely to lead to a life insurance claim denied. 

Circumstance Of Death Wasn’t Covered

How the insured dies can affect whether or not a life insurance claim is denied. Policies exclude specific death types. Your policy may exclude the following types of deaths.

  • Suicide
  • Death doing something illegal
  • Homicide
  • Extreme or dangerous hobbies

Suicide is the most commonly excluded cause of death on life insurance policies. Though some life insurance claims get denied due to other reasons. This family was originally denied the death benefit because the father died while driving recklessly. 

Missed Premium Payments

You must keep up the agreement for the policy in order to receive the death benefit. If the insured allows the policy to lapse, whether intentional or not, the life insurance company can deny the claim. 

Signing up for automatic payments prevents this from happening. If you’re considering allowing your policy to lapse, you should know you have more options.  

The Employer Failed To Complete Necessary Paperwork or Communicate Benefits to Employees

Group life insurance is common in a lot of workplaces. With employer-provided life insurance programs, the employer’s responsible for sharing necessary information. To both the employees and the life insurance company. 

When this information doesn’t get communicated correctly, you may have a life insurance claim denied. A company doesn’t always communicate with its employees about who can have coverage or what would be covered in the event of a death. For example, the group insurance program may change without the employees knowing how it affects them. 

An employer may tell someone on disability they don’t need to pay their premiums. Unfortunately, their employer failed to submit the necessary paperwork to make that happen. The employee then loses coverage. 

Situations When The Death Benefit Payout is Delayed

There are a few situations where a life insurance claim isn’t denied, but there’s a delay in paying the death benefit. 

Unclear Beneficiary Information

Policies will ask for a primary beneficiary, secondary beneficiary, and additional final beneficiaries. In the event that a beneficiary dies before the insured, there’s still a remaining clear beneficiary. 

However, sometimes someone only lists a primary beneficiary. Or the beneficiaries have passed away. 

Sometimes the insured will list the beneficiaries of the policy as “children” or “relatives”. When there isn’t a specific person designated, the life insurance company will take longer to approve the death benefit. 

After a divorce or marriage, you need to update a life insurance policy. When this doesn’t happen, there could be a dispute over who will receive the death benefit. Thus requiring more time to sort out the policy. 

The Beneficiary Is a Minor

If you list a minor as the beneficiary they won’t receive the death benefit until they’re 18. This will delay the claim or require additional paperwork to have the death benefit released to a guardian. 

Appealing When You Have A Life Insurance Claim Denied

Life insurance companies will have a period after their decision where you’re able to appeal. In many of these situations where there’s a minor misunderstanding, such as a mistake with paperwork, you can appeal. 

More complicated cases may need legal representation to get claims paid out with the death benefit. 

Still, it’s best to understand the situations that can lead to a life insurance claim denied. That way you’re able to stay up to date with all documents and policy changes. Every policy is different so don’t make assumptions about coverage. Assumptions can lead to your family not getting the death benefit after paying for decades of coverage. 

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