Typical Reasons for Denying Life Insurance Claims
In most cases, insurance companies will promptly honor life insurance claims, but they’ve also been known to throw out reasons that beneficiaries don’t fully understand in an effort to delay or deny payment. In some cases, the cited reasons may be legitimate. Common reasons for denying a life insurance claim include:
Life insurance policies generally preclude payments for death during the first two years of the policy. If the death occurs during this contestability period, the company may deny the claim.
Cause of Death
Life insurance policies generally won’t cover claims for policyholders who die from suicide. Other exclusions may also apply, including drug and alcohol abuse, involvement in dangerous activities, and more.
Failure to Disclose Necessary Information
If the policyholder had a pre-existing condition — such as high blood pressure — prior to taking out the policy and failed to disclose it, the insurer can deny claims.
Non-Payment of Premiums
If a payment is received after the grace period expires, the insurance company can proclaim the policy to be lapsed or terminated. If that happens, no claim will be honored.
Lack of Beneficiary Designation
If there is no beneficiary named in the policy, the insurance company can deny payment, or after a lengthy delay, pay it to the deceased’s estate.
What to Do in The Face of a Denial
Fortunately, according to the American Council of Life Insurers (ACLI), fewer than one-half of one percent of all life insurance claims are denied, but if you’re one of them, what can you do?
If your insurance company denies your claim, the first step is to investigate the reason given so you can lodge an appeal. Ask the insurance company for its requirements on filing an appeal, and get to work on gathering the documentation and evidence you need to counter the company’s reason for denial.
Sometimes, the insurer may be hoping you won’t look too deeply and just give up in face of complex appeal requirements. Don’t. They could be using bad faith tactics against you to frustrate and stall you. If you feel like you’ve been wrongly denied a claim, don’t face this challenge on your own. Call or reach out to our firm, Arnett & Arnett, PC, for help.