Life insurance is one of the primary resources people rely on to provide surviving family members with financial stability after his or her death. To have the insurance company reject the claim 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.
Making a Life Insurance Claim
Once the insured has passed away, it falls to the beneficiary to report the death to the life insurance company and complete all the necessary paperwork. The details will vary based on both the provider and the policy you have, but the beneficiary will need to obtain the death certificate as well as the letters testamentary (also known as the letters of administration) that prove they are indeed the intended recipient of the policy’s death benefit. After the documentation is submitted, the insurance company typically has 30 days to respond.
At this point, the beneficiary can wait and hope that the claim is paid as expected, in which case they will likely have to choose between a lump sum or regular deposits in a designated account. Whatever form it takes, this insurance payout represents the provider’s fulfillment of its side of the contract with the insured. The provider might also opt to delay or deny the life insurance claims. Both results require immediate action from the beneficiary, but a denial in particular means that you might need to contest the provider’s conclusion if you believe you’re in the right. We’ll discuss that approach in a bit.
Let’s go over some of the main reasons why your life insurance claims might be denied:
Misrepresentation and Inaccurate Information
Anytime you provide faulty or incomplete personal data to your life insurance company, you run the risk of leaving your policy open to misrepresentation. In this scenario, an applicant is accused of falsifying information – whether intentionally or not – in order to ensure that their 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
Most life insurance policies feature a contestability period during the first two years after the purchase date, during which the provider can reassess and contest (hence the name) your application. If the policyholder dies during this period, the insurance company can withhold delivery of the death benefit on the basis that you provided incorrect data on your application. Again, a blatantly honest application could mean the difference between your family’s financial protection or lack thereof.
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 your life insurance coverage. If you fail to pay your premiums on time (or within the designated grace period), your policy will likely lapse. If the policyholder passes away after this happens, your plan will no longer be active, leaving any claims likely to be denied in short order. You’re better off reaching out to your representative to handle any payment issues before such a predicament occurs.
Exclusions and Uncovered Causes
Depending on your policy, not all causes of death may be covered by your provider. If an accidental death falls outside the parameters of your policy but winds up being the reason for the insured’s untimely passing, your claim will most likely be denied. This rationale also applies to any exclusions – the circumstances and conditions that are decidedly not covered – that may be listed in your policy. The most popular exclusion relates to suicidal deaths, but check your policy details to see which pertain to your case.
When You Want to Contest
Even though a claim denial can wreak havoc on a beneficiary’s financial outlook, he or she can still contest the decision if they truly believe that it was reached in error. The first step should always be to alert the provider to your dispute and see if an amicable resolution can be reached between the beneficiary and the insurance company itself. If this approach doesn’t work, the beneficiary may need to seek out legal counsel and mount a court case against the provider.
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