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Amelia Buckley is an insurance editor for Bankrate.com and an insurance agent with a personal lines licens. She emphasizes creating informative, engaging and nuanced content to support readers in making personalized insurance decisions with confidence.
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Mark Friedlander
Mark Friedlander is director of corporate communications at III, a nonprofit organization focused on providing consumers with a better understanding of insurance.
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Experiencing a life insurance claim denial can make the already emotional time even more overwhelming. Each life insurance policy comes with a list of contingencies that can void coverage, but in some cases, you may be able to take steps to contest the rejection. If you are facing a denied life insurance claim, Bankrate’s team of insurance experts have a list of strategies that might help. We’ll review common reasons why insurers may deny a life insurance claim and what you can do about it.
When denying a claim, life insurers typically cite policy delinquency, material misrepresentation, contestable circumstances or documentation failure as a reason for doing so. Here is what you need to know about each of these circumstances.
Policy delinquency occurs when a policyholder fails to pay their life insurance premiums on time, causing their coverage to lapse. If this happens, the life insurance policy will not be in force at the time of the insured’s death.
This is one of the most common reasons life insurance policy beneficiaries see their claims denied. The policyholder may have let their coverage lapse and failed to inform their beneficiaries before they died, unintentionally leaving their beneficiaries without a death benefit.
When initially applying for a life insurance policy, it is crucial that the policyholder is honest and forthcoming about their medical history and health status. Whether it is a heart murmur, a history of smoking or information about weight, untrue statements on an insurance application may jeopardize the entire policy. Lying on a life insurance policy carries with it serious consequences, one of which includes potential claim denial for the beneficiaries following the death of the insured.
Other common misrepresentations include:
Contestable circumstances involve a death outside the scope of coverage, likely because the timing of the death falls within a contestable timeframe. A contestability period typically lasts the first two to three years following a policy’s effective date. During this period, insurers may deny claims under certain circumstances.
Contestable circumstances usually include things like suicide or dying while performing an illegal act. While some policy exclusions in contemporary policies are less common, older policies sometimes exclude death during military service, aviation and health conditions such as HIV.
Documentation failure refers to family or heirs failing to provide the necessary paperwork required to receive the death benefit. At the very least, insurers usually require a death certificate in order to start the payment process for the beneficiaries.
Contestability in the first couple years of a new life insurance policy is not unlike a probationary period. During the contestability period, an insurer retains the right to review the initial policy application and death benefit for possible misrepresentations or life insurance fraud.
While an investigation may delay payment of a death benefit, insurers should pay on the policy so long as investigations lead to no conclusion of wrongdoing. In the case of a homicide, for instance, insurers may provide the payout only after police clear policy beneficiaries.
Receiving a life insurance claim denial letter may be stressful for beneficiaries who are financially dependent on life insurance benefits. Depending on the reason for the claim denial, you may have some options to contest the denial. In cases with obvious mishandling of claims, your state’s department of insurance and your attorney may offer helpful resources to argue why the claim should be paid out.
Insurers generally spell out their reasons for denying claims in their initial denial letter. However, in the event the reasons lack clarity – or insufficient supporting details – you may want to request more information around the specific objections to payment of the death benefit.
Providing additional supporting documentation may help you contest the denial. This may include medical records, autopsy reports or insurance payment receipts. For instance, if you produce receipts of the policyholder paying their premium on time, you may be able to disprove policy delinquency. Or, if you have autopsy results, this may help prove that the policyholder did not die by suicide during the contestability period.
In cases involving employer group life insurance or other similar policies, you will need to move quickly if you want to contest. Typically, you only have a 60-day window to appeal the denial.
Beneficiaries with a denied benefit may be able to appeal the claim by presenting evidence according to the process established by the insurer. This process and how long it takes will vary by insurer. In some cases, denied beneficiaries may want to contact their state’s department of insurance or attorney general for their expertise in insurance navigation. Some states even employ insurance appeals specialists, and state-level representation may have substantial weight to an insurer.
Avoiding a claim denial in the first place may save you the headache of appealing a denied claim. Although the burden of avoiding a claim denial typically lies with the policyholder, these best practices may help ensure a smooth claim payout process.
The best life insurance company is different for every applicant. Life insurance quotes do not vary much from company to company, so figuring out which policy type and company could meet your needs is likely more important than price. Comparing different policy types and considering your own life insurance goals may be the quickest way to narrow down the best life insurance type and company for you.
Life insurance claims denials are fairly uncommon, but they do happen. According to a Reinsurance Group of America survey, 1-3 percent of life insurance claims are investigated or denied for fraud or misrepresentation.
It is possible for a life insurer to deny a claim for smoking. If the policyholder lied on their application and said they were a nonsmoker, and the insurer later finds out that this is untrue, it has grounds to cancel the policy or deny paying the death benefit to beneficiaries.
Natalie Todoroff is an insurance writer and industry analyst for Bankrate. She is based in San Francisco and holds a personal lines insurance license.
Amelia Buckley is an insurance editor for Bankrate.com and an insurance agent with a personal lines licens. She emphasizes creating informative, engaging and nuanced content to support readers in making personalized insurance decisions with confidence.
Mark Friedlander is director of corporate communications at III, a nonprofit organization focused on providing consumers with a better understanding of insurance.
