Document with denied stamp

Common Reasons for a Life Insurance Claim Denial

Arnett & Arnett, PC June 14, 2023

We buy life insurance as a cushion for our loved ones should we pass away before our time and even for the day when we have reached our anticipated ripe old age. We assume and expect that the insurance provider will honor their commitment and make the agreed-upon payout when the claim is made. However, what happens if the claim is denied? Do insurance companies really have legitimate reasons to deny a life insurance policy claim?

The answer is yes. In some cases, they do, and it can be devastating for the loved ones who may be dependent on the policy’s promised sum. What can they do if a life insurance policy claim is denied? Perhaps the best answer is to understand the thinking of life insurer providers and also the provisions that they include in their policies. 

If you as a beneficiary are facing a life insurance claim denial in or around Chandler, Arizona, contact Arnett & Arnett, PC. Denials may be rare but they do happen, and the insurer must provide you with a reason for their decision. We can help you appeal that decision. We have been helping clients involved in insurance disputes for more than four decades. Reach out to us if you’re anywhere in Arizona, including not only Chandler, but also Phoenix, Tucson, and Flagstaff. 

Understanding Life Insurance: The Basics

There are basically two types of life insurance policies you can purchase as an individual: term and whole life. Term insurance provides no cash build-up that you can tap, and it has a set limit on how long it will last, say five or ten years. Whole life is more like an investment. The money you pay builds up something similar to a savings account, and it does not “term” out. It lasts until you withdraw, miss your payments, or pass away. 

There is one other type. Employers sometimes offer employees life insurance coverage, but it generally expires once you leave the company if there is no provision for portability so you can assume the premiums. 

Contestability Period: What Is This?

What all types of policies have in common is something called a contestability period, usually lasting two years.  

During this period, if the policyholder passes away, the insurer will often seek answers as to the cause of death, the physical condition of the decedent before death, whether it was a suicide (which won’t be paid during the contestability period), and whether the policyholder was engaged in a dangerous occupation or hobby. 

Common Reasons for Life Insurance Claim Denials

In addition to the contestability period, which is sort of like a probationary period on claims pending an investigation by the insurer, other reasons for a possible denial include: 

  • POLICY DELINQUENCY: If the policyholder failed to make on-time premium payments, the policy will lapse, and therefore, no payout will be available. It’s possible the policyholder quit paying the premium but never told the beneficiaries. 

  • MATERIAL MISREPRESENTATION: This applies mostly during the contestability period. If the policyholder misrepresented his or her health, age, income, or immigration status, or neglected to inform the company of the existence of another life policy, this could be grounds for denying a claim. 

  • DOCUMENTATION FAILURE: Though usually the one document a beneficiary must present is a death certificate, failure to provide the proper documentation can lead to a claim denial, if only temporary. 

  • DEATH WHILE DOING AN EXCLUDED ACTIVITY: Insurers won’t cover someone involved in an activity excluded in the document, such as committing a crime. 

  • POLICY TERMED OUT: Another reason for denial could be that the term policy has simply reached past its end-date. It is no longer in effect. 

Steps to Take to Avoid a Denial

The two most important steps to avoid a denial are to be totally truthful on your application and then to pay your premiums on time. If you conceal something, that could lead to delays, if not a denial, if you do pass away and your beneficiaries make a claim. 

How About an Appeal?

Insurance companies will establish their own appeals process. The insurers also set time limits on such appeals. Generally, this will be a matter of days—say 45 to 90—and not months or years. You really don’t want to go it alone on the appeals process. The insurers have attorneys on standby to challenge you. 

Your best approach to filing an appeal is to take your letter of denial to an experienced life insurance attorney and work with that person on assembling the documentation and other evidence necessary to launch your appeal. Let your attorney deal directly with the insurance representatives. Insurers and their representatives have techniques and tricks designed to frustrate the average beneficiary and thus stop the process in its tracks. Your attorney will know how to handle these tricks. 

Help When You Need It Most

With more than four decades’ experience in aggressively pursuing clients’ claims and appeals against life insurance companies, we at Arnett & Arnett, PC stand ready to help you when a life insurance claim is denied. Reach out to us, and we will deal with your situation with compassion and understanding, doing everything we can to help you exercise your rights.