Why Life Insurance Claims Get Denied

Life insurance is one of the primary resources people rely on to provide surviving family members with financial stability after their death. To have a life insurance claim denied creates the very dilemma that the policy’s existence was intended to prevent.

Before you run the risk of your policy’s rejection, here’s a crash course on how your coverage could get derailed.

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Making a Life Insurance Claim

Once the insured has passed away, the beneficiary should notify the life insurance company of the death. A copy of the death certificate will be needed, but other claim requirements may vary based on the policy you have and the beneficial arrangement. After the documentation is submitted, the insurance carrier typically has 30 days to respond, but may vary based on the state.

After all requirements have been received, the beneficiary will await the payent of their claim. This insurance payout represents the insurance company’s fulfillment of the contract. There are instances in which the the insurance company might opt to delay payment based on the need for additional information or deny the life insurance claim. Both outcomes require immediate action from the beneficiary. In the event that the insurance claim is denied, the beneficiary may need to take additional steps to dispute the carrier’s decision. We’ll discuss that approach in a bit.

Let’s go over some of the main reasons for claim denial:

Misrepresentation and Inaccurate Information

Anytime false or incomplete personal data is provided to a life insurance company by an applicant, any claims are at risk of denial due to material misrepresentation. In this scenario, an applicant may be accused of falsifying information – whether intentionally or not – in order to ensure that the policy is approved. An example of this would be omitting details about a serious medical condition. A word of advice: Double-check your application before you submit it to ensure that you’re being as truthful as you can be.

The Contestability Period

Many life insurance policies feature a contestability period during the first two years after the purchase date. If the insured passes away during this period, the insurance company has the right to reassess information provided at the time of application. If the review reveals conflicting information or information that would have affected the policy at the time of sale, the insurance company may delay or contest the payment of the claim.   

Lapsed Policies and Overdue Premiums

If you stop paying your electric bill, eventually your home’s lights will go out. The same principle applies to life insurance coverage. If you fail to pay your premiums on time (or within the designated grace period), this may result in a lapsed policy. If the insured passes away after this happens, while an unpaid premium remains outstanding, any claim payments may be at risk of denial or a reduction in benefits payable. Overdue premiums should be addressed right away to ensure the full payment of any claims.

Life Insurance Exclusions and Uncovered Causes

It’s important to note that not all circumstances may be covered by the insurance company, but additional information concerning non-covered scenarios can be found in the exclusions section of a policy. If the circumstances surrounding the insured’s death are excluded, this may result in a denied death benefit. Suicide is a common exclusion found in life insurance policies, particularly in the first few years. Review your policy carefully to understand your coverage fully.

When You Want to Contest

If a beneficiary believes that a claim decision was made in error, the decision can be disputed with the insurance company by doing any of the following:   

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