Life insurance is an excellent coverage option regardless of your age or health, but there are rules within the policy that are important to understand. Upon death, a claim is made for the policy to pay out to the beneficiaries listed within. However, that won’t happen if the terms of the policy have been breached.
Insurers carefully examine the terms within a policy when a claim is made, making sure that all of the obligations within have been met. If not, the money might pay the estate instead of the beneficiaries. This can be a confusing situation, but here are the five reasons why life insurance claims are denied.
1. Death in the Contestability Period
All policies come with a contestability period. This usually lasts two years from when the policy was purchased and is primarily used to ensure the accuracy of information. Deaths within the contestability period are investigated to ensure the policyholder wrote down honest and accurate information before claims are paid.
The policyholder may have lied about a medical condition, life insurance could have been picked up as part of a murder plot, or there could be other fraudulent schemes at play. All of this is also taken into consideration during the contestability period and sometimes after. As long as there is no form of fraud, things like slight omissions or mistakes are usually not grounds for denial.
2. The Form of Death Was Not Covered
Depending on when the policy was picked up, there may be forms of death that are excluded. Older policies exclude things like skydiving, scuba diving, and even active duty in a war. Newer policies do not have these exclusions, those many still do not cover suicide.
3. Failure of Disclosure
One of the most common reasons for a denial is that relevant personal information is not provided. Dishonest answers to application questions such as driving-related convictions or hiding a medical condition are grounds for denial.
Even if someone were in the middle of speaking with Los Angeles murder defense lawyers for an open case, leaving details like that out can come back to haunt beneficiaries. Minor mistakes like writing the wrong address or a wrong driver license number don’t count, though.
4. Policy Premiums Were Not Paid
If a premium lapsed, then the policy will not pay out. As policyholders age, forgetting to make a payment can be common. Most insurers have a 30-day grace period for that, but you can also use autopay from a bank account to ensure this doesn’t happen.
Cash value policies, namely whole life insurance, also include the option to pay overdue premiums from the policy’s value. That can help in a pinch, but keep in mind that it lowers the amount that can be paid out to beneficiaries.
5. Not Enough Documentation
Finally, there is one instance where the beneficiary can cause the claim to be denied. This happens when they provide insufficient documentation. Those making a claim need a certified copy of the death certificate, a copy of the policy, and any claims forms. Some insurers might need a full coroners report and physician’s statement depending on the circumstances of the death, as well.