5 Excuses Life Insurance Companies Use to Deny Your Claim

by Miranda Marquit · 3 comments

When you purchase life insurance, you do so with the hope that your loved ones will be taken care of if you pass away prematurely. However, before you congratulate yourself on making sure your family is provided for, take a step back and closely review the situation. There are things that can still go wrong, leaving your loved ones in a financial bind.

“Filing a life insurance claim does not guarantee you will receive what you are entitled to,” says Tatiana Kadetskaya, Managing Partner at Kadetskaya Law Firm. “A life insurance claim can be paid, delayed, or denied.”

Before you fill out the paperwork, make sure you know some of the reasons that a life insurance claim can be denied. You don’t want to pay your premiums, and then leave your family in an even worse position later.

Here are 5 reasons Kadetskaya says a company might deny your claim.

1. Material Misrepresentations on the Policy

“If the insured dies within the first two years from the date a life insurance policy became effective, the insurance company has the right to contest the policy,” says Kadetskaya.

This means the company checks the background information. If they believe there have been any misrepresentations that affect the risk presented by the insured, the claim could be denied.

2. Employer Fails to Submit a Waiver of Premium

This issue can be especially maddening since it is in someone else’s control. Because many employers offer life insurance coverage through work, employees think they are covered. Unfortunately, there are situations in which employers need to submit documents — and they don’t.

“The law protects beneficiaries from unfairly denied claims in such situations,” says Kadetskaya. “Benefits can still be recovered through the legal process.” But it can be a difficult road to go down.

3. Lapse in Policy

If you don’t pay premiums and your policy lapses, your beneficiaries may not receive a payout. “Denied claims due to lapse are very common, and insurance companies often use nonpayment of premiums as an excuse to deny a claim, even when a claim should be paid,” Kadetskaya says.

“As a beneficiary, you have the right to know whether the insurance company sent premium-due notices to the correct address and whether the notice clearly warned the insured of the pending lapse.” If you can prove that the notices weren’t properly provided, you may be able to receive payment.

4. No Beneficiary Designation

If the insured person hasn’t named a beneficiary, it can be difficult to figure out who gets the proceeds. Kadetskaya says to check with state law and company provisions to figure out how benefits are paid out in these cases.

5. Policy Exclusion

Know the policy exclusions. Every contract has exclusions that describe situations in which a payout won’t be made. “Many exclusions are ambiguous and many, when taken together with other exclusions, cancel each other out,” says Kadetskaya.

A denied claim doesn’t have to be the end of the story, though. Kadetskaya ways that it’s a good idea to understand the contract conditions before signing. Beneficiaries should also know that they have options, even if a claim is denied.

“Every denial should be reviewed by an experienced life insurance attorney,” says Kadetskaya. “It should be contested if it appears a claim was wrongfully denied.”

Have you ever had a life insurance company deny your claim? What was your experience?

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  • Charlotte MacLeod says:

    I was beneficiary and was denied because the signatures didn’t match what they have on file. It seems funny they paid the funeral home and the balance of 4,400 was with held due to the signature not matching up what they have on file. The Insured was dieing ,he had cancer ,diabetes, Heart trouble,and at the last Kidney failure.
    His hand writing was a miss due to his health conditions. He changed the beneficiary 3 wks before he passed.

  • Matilde says:

    My father is the primary on a life insurance he had my mom for many year on his life insurance the divots long time ago, but he never temove her from his insurance, when he tried to applied was denied because my mom is his ex wife even no change was
    made I need advice to confirm my father can claim tha insurance

  • John C @ Action Economics says:

    I guess the most important aspect of all of this is attention to detail. It is up to the consumer to make sure that the payments are made and that beneficiaries are assigned. I think a lot of people overlook assigning secondary beneficiaries and do not update their policies often enough to reflect changes in their lives. It’s nice to have insurance through work but I think those policies should be seen as “extra” over your primary policy.

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