It seems fairly straightforward that if one has life insurance, and then passes away, the life insurance company pays out the life insurance benefits to the surviving loved ones. However, as anyone who has ever filed an insurance claim before can attest, dealing with insurance companies is rarely that straightforward. And, while the denial of life insurance claims is rare, it is not necessarily uncommon.
Why deny?
If the life insurance company is refusing to pay, it could be for one of several reasons. The insurance policies themselves often have a number of terms that void one’s coverage. Most commonly, this could be seen in a documentation failure or policy delinquency, but less common claims are material misrepresentation or contestable circumstances.
Policy delinquency
This is a pretty common argument in all insurance claim denials, in that the policyholder failed to pay their premiums on time. This may have been intentional by the policyholder, an error or something more nefarious on the part of the insurance company, especially with highly insured individuals.
Material misrepresentation
This is another common reason insurance companies use to deny coverage because it is based on a “lie” by the insurance policyholder. In other words, the argument here is that when the policyholder applied for insurance, they failed to disclose something or were not entirely truthful about their medical history. Depending on the nature of one’s death, the most common misrepresentations are whether one smokes or drinks, as well as how much they weigh. Another misrepresentation could be one’s medical history, like a heart murmur. This is because life insurance premiums are based on this information. In these cases though, the insurance company may not outright deny the claim but instead, elect to subtract what the additional premium should have been from the benefit amount.
Contestable circumstances
This is another way of saying that the death of the policyholder fell outside the scope of the insurance coverage. The most common situation of this is where the insurance company claims that the death occurred within a contestable timeframe, usually within the first three years of the insurance policy’s effective date.
Regardless of the reason though, the insurance company’s denial or refusal to pay does not mean that beneficiaries are without recourse. Contact an experienced attorney immediately. They can fight for the money the family deserves during this difficult time.